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Are the Saudis blinking?; sort of a form of "price fixing"
Topic Started: Aug 12 2016, 07:40 PM (272 Views)
Banandangees
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Attempts to fix prices upward.

Oil Rises After Saudi Call for Action on Prices
Crude prices rose 4% overnight to a three-week high on signs of an output cap
August 12, 2016 wsj

Quote:
 
Oil prices ticked higher on Friday after Saudi Arabia said it would work with other oil producers to stabilize prices, a comment interpreted by some to mean the world’s biggest oil producer could support a collective production cap.

The comment by Saudi Arabia’s energy minister, Kahlid al-Falih, boosted oil prices by more than 4% overnight to a three-week high.

“This has most likely caused some investors to close out their recent bearish bets, pushing prices higher,” ANZ Research said.

Brent crude, the global oil benchmark, rose 0.1% Friday morning to $46.10 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.4% at $43.66 a barrel.

Prices have been largely flat recently as traders and analysts were divided on what major producers, especially those within the Organization of the Petroleum Exporting Countries, would do to rebalance the oil market.

This week, OPEC announced the 14-member bloc will meet on the sidelines of an energy conference next month in Algeria, reviving the idea of a coordinated production cap, after the cartel failed to reach an agreement at a meeting in April.

“Markets remain highly skeptical over the potential for coordinated action to balance oil markets, with the failure to reach an output freeze deal earlier this year still fresh in the mind. Nevertheless, the knee-jerk reaction that followed sent crude prices rallying,” said brokerage PVM in a note.

Saudi Arabia is pumping record amounts of oil—10.67 million barrels a day in July—causing some analysts to cast doubts over the kingdom’s sincerity.

“This doesn’t look like a country that is giving up its fight for market share,” said Tim Evans, a Citi Futures analyst.

Despite the ramp up in production by OPEC, global output growth is seen lagging behind demand this year, because of dwindling output from non-OPEC producers and robust demand, the International Energy Agency said Thursday.

It forecasts non-OPEC production to fall by 900,000 barrels this year, before rebounding by 300,000 barrels a day in 2017. The Paris-based agency, however, gave a grimmer outlook on demand, estimating global oil -demand growth to slow to 1.2 million barrels a day in 2017 from 1.4 million barrels forecast for this year.

“While the downward revision of global demand is expected, we still believe that non-OPEC supply contraction is underestimated by the IEA,” Bernstein Research said in a note.

Nymex reformulated gasoline blendstock—the benchmark gasoline contract—fell 0.1% to $1.36 a gallon. ICE gas oil changed hands at $404.50 a metric ton, up $1.75 from the previous settlement.



"A collective production cap." Isn't that the opposite of what the Saudis attempted early on..... to continue production in light of the U.S. increase in production via fracking which would produce an oil glut, lowering prices, forcing U.S. frackers out of business. That hasn't proven fruitful for the Saudis, or Venezuela, or Russia, with the main economy of SA and Venezuela being oil. It's like the Saudis shot themselves in the foot and took Venezuela with them. Now they want to "collectively" fix production downward forcing prices upward and are looking for "collective bargaining" with other OPEC nations to save themselves. But, wouldn't that just put frackers back in business? I don't see oil staying at the low $40s but I don't see it going back to the $100s either.

The problem with SA and Venezuela, they've depending almost solely on an economy based on oil. Oh well, easy come, easy go.... the life of welfare states. :smile:
Edited by Banandangees, Aug 12 2016, 07:42 PM.
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Berton
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Oil companies are already starting to ramp up their drilling as they have been able to cut drilling costs and find ways to get even more production out of a completed well. Keep in mind that there are a lot of wells which were drilled but not completed. We can still bring them on line.

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Stoned
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Banandangees
Aug 12 2016, 07:40 PM
Attempts to fix prices upward.

Oil Rises After Saudi Call for Action on Prices
Crude prices rose 4% overnight to a three-week high on signs of an output cap
August 12, 2016 wsj

Quote:
 
Oil prices ticked higher on Friday after Saudi Arabia said it would work with other oil producers to stabilize prices, a comment interpreted by some to mean the world’s biggest oil producer could support a collective production cap.

The comment by Saudi Arabia’s energy minister, Kahlid al-Falih, boosted oil prices by more than 4% overnight to a three-week high.

“This has most likely caused some investors to close out their recent bearish bets, pushing prices higher,” ANZ Research said.

Brent crude, the global oil benchmark, rose 0.1% Friday morning to $46.10 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.4% at $43.66 a barrel.

Prices have been largely flat recently as traders and analysts were divided on what major producers, especially those within the Organization of the Petroleum Exporting Countries, would do to rebalance the oil market.

This week, OPEC announced the 14-member bloc will meet on the sidelines of an energy conference next month in Algeria, reviving the idea of a coordinated production cap, after the cartel failed to reach an agreement at a meeting in April.

“Markets remain highly skeptical over the potential for coordinated action to balance oil markets, with the failure to reach an output freeze deal earlier this year still fresh in the mind. Nevertheless, the knee-jerk reaction that followed sent crude prices rallying,” said brokerage PVM in a note.

Saudi Arabia is pumping record amounts of oil—10.67 million barrels a day in July—causing some analysts to cast doubts over the kingdom’s sincerity.

“This doesn’t look like a country that is giving up its fight for market share,” said Tim Evans, a Citi Futures analyst.

Despite the ramp up in production by OPEC, global output growth is seen lagging behind demand this year, because of dwindling output from non-OPEC producers and robust demand, the International Energy Agency said Thursday.

It forecasts non-OPEC production to fall by 900,000 barrels this year, before rebounding by 300,000 barrels a day in 2017. The Paris-based agency, however, gave a grimmer outlook on demand, estimating global oil -demand growth to slow to 1.2 million barrels a day in 2017 from 1.4 million barrels forecast for this year.

“While the downward revision of global demand is expected, we still believe that non-OPEC supply contraction is underestimated by the IEA,” Bernstein Research said in a note.

Nymex reformulated gasoline blendstock—the benchmark gasoline contract—fell 0.1% to $1.36 a gallon. ICE gas oil changed hands at $404.50 a metric ton, up $1.75 from the previous settlement.



"A collective production cap." Isn't that the opposite of what the Saudis attempted early on..... to continue production in light of the U.S. increase in production via fracking which would produce an oil glut, lowering prices, forcing U.S. frackers out of business. That hasn't proven fruitful for the Saudis, or Venezuela, or Russia, with the main economy of SA and Venezuela being oil. It's like the Saudis shot themselves in the foot and took Venezuela with them. Now they want to "collectively" fix production downward forcing prices upward and are looking for "collective bargaining" with other OPEC nations to save themselves. But, wouldn't that just put frackers back in business? I don't see oil staying at the low $40s but I don't see it going back to the $100s either.

The problem with SA and Venezuela, they've depending almost solely on an economy based on oil. Oh well, easy come, easy go.... the life of welfare states. :smile:
It has proven quite fruitless for the US. Frackers are, generally, in the tank.
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Berton
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Wake up and smell the roses you dummy. They are ramping up drilling.

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Pat
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Oil field action is ramping up and the production will follow. Each ear there have been improvements in technology and a maturing knowledge base. Remember, massive scale fracking is a new de.

I suspect within this year the American industry will surpass it's recent record production. The markets are a game any little fart is reason to raise or lower pricing.
Edited by Pat, Aug 13 2016, 02:05 AM.
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Brewster
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Celebrating how your country is managing to succeed in expanding 19th century technology is like Britain during the Industrial Revolution celebrating a new way to dig up rocks.
Edited by Brewster, Aug 13 2016, 03:05 AM.
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tomdrobin
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I think the Saudi's strategy kind of backfired on them. We shall see how it all works out. I like those low gas prices. But, that is detrimental the economies of states and countries that depend on the oil revenue. And, it provides less incentive for alternative energy development.

I get a big chuckle out of conservatives pointing to Venezuela as an example of the failure of socialism. While it is true that pure socialism hasn't been shown to be as productive as capitalism. The problem with Venezuela was they became to dependant on the oil wealth to sustain their economy. They quit growing food etc. to feed themselves, they could just import it with the oil money. Well when the oil money dried up they were screwed.
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Pat
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http://www.zerohedge.com/news/2016-08-12/mexicos-legendary-oil-hedging-desk-quietly-preparing-next-plunge

check this out Tom.
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Stoned
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Pat
Aug 13 2016, 02:04 AM
Oil field action is ramping up and the production will follow. Each ear there have been improvements in technology and a maturing knowledge base. Remember, massive scale fracking is a new de.

I suspect within this year the American industry will surpass it's recent record production. The markets are a game any little fart is reason to raise or lower pricing.
Fracking costs vary enormously. Todays price $44.40

Posted Image

Pick a chart, any chart and you will see that the cost of most frackers is prohibitive



https://www.google.com/search?q=shale+oil+breakeven+price+2015&biw=1408&bih=753&tbm=isch&tbo=u&source=univ&sa=X&ved=0ahUKEwjdsP7cxbzOAhVMSSYKHSzMBwAQsAQIKw&dpr=1
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Pat
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Stoned
Aug 13 2016, 03:03 AM
Pat
Aug 13 2016, 02:04 AM
Oil field action is ramping up and the production will follow. Each ear there have been improvements in technology and a maturing knowledge base. Remember, massive scale fracking is a new de.

I suspect within this year the American industry will surpass it's recent record production. The markets are a game any little fart is reason to raise or lower pricing.
Fracking costs vary enormously. Todays price $44.40

Posted Image

Pick a chart, any chart and you will see that the cost of most frackers is prohibitive



https://www.google.com/search?q=shale+oil+breakeven+price+2015&biw=1408&bih=753&tbm=isch&tbo=u&source=univ&sa=X&ved=0ahUKEwjdsP7cxbzOAhVMSSYKHSzMBwAQsAQIKw&dpr=1
http://www.zerohedge.com/news/2016-08-12/oil-slides-after-biggest-rog-count-rise-dec-2015

Here are some charts for you.
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