[rockdoc123]

one has to wonder what kind of conversations are going on through back channels between the US, Russia and Saudi Arabia.
SA seems to need US and likely Russia support to deal with ISIS, they still need US military support to deal with any potential Iran threats. Perhaps SA is feeling a bit more hubris these days but I would think it isn't a good idea to beard the lion in his den? I'm sure the US gov't has been happy at the prospect of being able to decrease imports so this can't be seen as good news to them.
Perhaps SA is taking a page from Putin's book, the current US administration doesn't seem to want to stand up to anyone, anywhere so SA may be wanting to make a play fully expecting that POTIS won't have the spin to stand up to them.
Will be an interesting few months ahead.

[Graeme]

Bad News For U.S. Drillers As Saudis Signal No Cuts To Oil Output

Despite a nearly 25% slide in oil prices in recent months, Saudi Arabia has no intention of cutting oil production. On the contrary, according to a Reuters report Sunday, the kingdom “is quietly telling oil market participants that Riyadh is comfortable with markedly lower oil prices for an extended period.” How much lower? Perhaps down to $80 per barrel, for a year or two.

This prediction runs counter to some expectations that the Saudis — as the world’s central banker of oil — the would cut production and push oil prices back above $100 in order to protect the budgets of weaker OPEC members, especially all-but-bankrupt Venezuela.

But the Saudis and the rest of OPEC might well consider Venezuela and its economically demented leaders to be an acceptable casualty of their greater mission: to wrest back market share from the United States and its legion of independent oil companies.

America’s oil production nadir came in 2008, when oil hit $147 amid U.S. output of 5 million bpd. Since then, breakthroughs in horizontal drilling and hydraulic fracturing has sent volumes surging to a current 8.5 million bpd.

OPEC could tolerate that 3.5 mm bpd of added American oil because supply disruptions in Libya and Nigeria and sanctions on Iran have kept the market tight amid steady demand. But with no end in sight to U.S. oil growth, there’s no surprise that a cartel will act like a cartel and clobber pretenders.

So, would sustained oil prices below $80 be enough to crush the smaller independent tight oil drillers that have made The Great American Oil Boom a reality?

forbes

[Graeme]

The Real Reason Saudis May Be Comfortable With Lower Oil Prices

In the face of the striking weakness in global oil prices, Saudi Arabia has further challenged markets by seeming uncharacteristically comfortable with the lower prices, refusing to vote with OPEC to cut production. Many have been seeing the Saudi's willingness to let oil prices drop as a retribution against the U.S.'s unrestrained oil boom. Others suspect a U.S.-Saudi conspiracy again Russia.

In fact, the real reason may lie in the country's deliberate development of solar energy to ensure a bright future in the face of eventually dwindling oil supplies.

In 2010, the Saudi government created the King Abdullah City for Atomic and Renewable Energy, or K.A.CARE and officially said the nation was hoping to get 30% of its energy needs from solar power by 2034. Bids have been opened for the installation of 41 gigawatts of solar power over the next 20 years.

At that level, the Saudis will be one of the world's top solar producers. That's interesting and certainly gives more credibility to suggestions the Saudis could eventually export solar power to Europe during Europe's cooler season. It also shows that the greening of Saudi Arabia has begun, something Wall Street needs to better understand when valuing the price of oil in the future.

The promise of solar energy may contribute enough to the Saudi domestic economy in the future to give the kingdom more confidence that its oil-dependent economy isn't going to tank if oil prices remain weak. The Saudis can afford to let oil prices drop to retain their market share. The outlook for solar energy growth may make any downside more easily absorbed.

thestreet

When the Petrodollars Run Out

Heating and motor vehicles are arguably the two biggest uses for petroleum that are vulnerable to technological change in the years to come. Right now, the United States still uses about two-thirds of its petroleum for gasoline and heating. The rest goes for jet fuel, propane, plastics, and other products that won't necessarily be replaced by electric cars, solar panels, and wind power. As demand for gasoline and oil-and-gas-based heating drop, crude and natural gas prices will probably fall as well. But then those other petroleum-based products will become cheaper, and people will buy more of them, adding back some demand for oil and gas. And of course, the emerging economies growing fastest today will contribute some demand as well.

Nevertheless, it's fair to assume that revenue from selling oil and gas will decline within a few decades in countries that are unlikely to find much in the way of new reserves, like Nigeria and Saudi Arabia. Other industries linked to petroleum, such as chemicals and refining, may suffer as well.

foreignpolicy

[Graeme]

Saudi, Kuwait Seen Curbing Oil Output at ’Opportune Time’

Saudi Arabia and Kuwait halted production at a jointly run oil field late this week, a move that could help ease a supply glut that has pushed global prices down 25 percent.

The 300,000-barrel-a-day Khafji field, located in the neutral zone between the two countries, was being shut because of environmental concerns, a person familiar with Saudi Arabian oil policy said yesterday, who asked not to be identified because the information isn’t public.

The shutdown comes as Saudi Arabia and other OPEC members face increasing pressure to scale back production while supply expands from the U.S. and other countries and demand growth slows. Asia’s oil market has become particularly flooded as the U.S. imports fewer cargoes.

“This shutdown comes at an opportune time for Kuwait and Saudi Arabia given the current perception of an oversupplied market,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone yesterday. Cutting Khafji’s production is more advantageous for the countries because the oil generates less revenue for them than their light crude supplies, he said.

The countries’ Khafji Joint Operations venture started gradually curtailing output Oct. 16, an internal memo signed by company chairman Abdullah al-Helal and obtained by Bloomberg shows. The field will resume operations once it’s in compliance with emissions standards issued by the Saudi Presidency of Meteorology and Environment, according to the memo.

bloomberg

[ROCKMAN]

Not really a sudden new trend in KSA production decreases. I found it rather odd that some folks were speculating that the KSA was forcing down the price of oil to hurt US shale players. In reality by cutting producing for the last 6 months they've actually provided a bit of a lifeline to those companies as well as all other oil exporters. If the KSA wanted to hurt US producers all they needed to do was lower their asking prices and produce more oil...not less:

Reuters - Saudi crude exports fell in August for the fourth month in a row to their lowest levels in three years, official data showed on Monday. The OPEC heavyweight exported 6.663 million barrels per day in August, down from 6.989 million bpd in July, according to data from the Joint Organisations Data Initiative (JODI). The August export figures were the lowest since March 2011 and down from 7.795 million in August last year. They compared with 6.946 million bpd in June and 6.987 million bpd in May.

[Tanada]

Not really a sudden new trend in KSA production decreases. I found it rather odd that some folks were speculating that the KSA was forcing down the price of oil to hurt US shale players. In reality by cutting producing for the last 6 months they've actually provided a bit of a lifeline to those companies as well as all other oil exporters. If the KSA wanted to hurt US producers all they needed to do was lower their asking prices and produce more oil...not less:

Reuters - Saudi crude exports fell in August for the fourth month in a row to their lowest levels in three years, official data showed on Monday. The OPEC heavyweight exported 6.663 million barrels per day in August, down from 6.989 million bpd in July, according to data from the Joint Organisations Data Initiative (JODI). The August export figures were the lowest since March 2011 and down from 7.795 million in August last year. They compared with 6.946 million bpd in June and 6.987 million bpd in May.

ROCKMAN, do we know is KSA total production is down, or just exports are down? If the former they could be fighting peaking out and trying to prevent panic by temporarily lowering prices until after the USA election. If the latter then their strategy could be cutting price and production together to make a point to Iran and others about who gets to set the OPEC price.

[ROCKMAN]

T - Reuters says exports. Are they correct? I tend to believe them more then almost all other sources.

[Graeme]

Pre-OPEC Producer Meeting Fails to Deliver Oil Output Cut

Nations supplying a third of the world’s oil failed to pledge output cuts after meeting in Vienna today. Russia can withstand prices even lower than they are now, the nation’s biggest producer said.

Officials from Venezuela, Saudi Arabia, Mexico and Russia said only that they would monitor prices. Crude futures extended losses in London and New York. OPEC meets in two days, with analysts split evenly over whether the group will lower output in response to the crash in prices.

Crude fell into a bear market this year amid the highest U.S. production in 31 years and speculation that Saudi Arabia and other members of the Organization of Petroleum Exporting Countries won’t do enough to curb a surplus. Prices are below what nine of group’s 12 members need to balance their national budgets, data compiled by Bloomberg show.

“All these countries are significantly affected by lower prices and want to see cuts, but it is a big step between having these talks and taking actual coordinated action to achieve this,” Richard Mallinson, geopolitical analyst at London-based Energy Aspects Ltd., said by phone today. “The key is going to be what happens amongst OPEC members.”

bloomberg

[Graeme]

OPEC heading for no output cut despite oil price plunge

OPEC Gulf oil producers will not propose an output cut on Thursday, reducing the likelihood of joint action by OPEC to prop up prices that have sunk by a third since June.

"The GCC reached a consensus," Saudi Arabian Oil MinisterAli al-Naimi told reporters, referring to the Gulf Cooperation Council which includes Saudi Arabia, Kuwait, Qatar and the United Arab Emirates. "We are very confident that OPEC will have a unified position."

"The power of convincing will prevail tomorrow ... I am confident that OPEC is capable of taking a very unified position," Naimi added.

A Gulf OPEC delegate told Reuters the GCC had reached a consensus not to cut oil output. Three OPEC delegates separately told Reuters they believed OPEC was unlikely to take any action when the 12-member organisation meets on Thursday after Russia said it would not cut output in tandem.

The OPEC meeting will be one of its most crucial in recent years, with oil having tumbled to below $78 a barrel due to the U.S. shale boom and slower economic growth in China and Europe.

Cutting output unilaterally would effectively mean for OPEC, which accounts for a third of global oil output, a further loss of market share to North American shale oil producers.

reuters

[Graeme]

Saudis block OPEC output cut, sending oil price plunging

Saudi Arabia blocked calls on Thursday from poorer members of the OPEC oil exporter group for production cuts to arrest a slide in global prices, sending benchmark crude plunging to a fresh four-year low.

Brent oil fell more than $6 to $71.25 a barrel after OPEC ministers meeting in Vienna left the group's output ceiling unchanged despite huge global oversupply, marking a major shift away from its long-standing policy of defending prices.

This outcome set the stage for a battle for market share between OPEC and non-OPEC countries, as a boom in U.S. shale oil production and weaker economic growth in China and Europe have already sent crude prices down by about a third since June.

"It was a great decision," Saudi Oil Minister Ali al-Naimi said as he emerged smiling after around five hours of talks.

OPEC said in a statement that members had agreed to roll over the ceiling of 30 million barrels per day, at least 1 million above OPEC's own estimates of demand for its oil next year.

"It is a new world for OPEC because they simply cannot manage the market anymore. It is now the market's turn to dictate prices and they will certainly go lower," said Dr. Gary Ross, chief executive of PIRA Energy Group.

reuters

[DesuMaiden]

Most of the remaining oil reserves are in the Middle East...about 2/3 of the world's remaining oil reserves are in the Middle East, which is why Middle East's. oil remain central to the world's oil markets. This is also why the USA wants to control the Middle East. That way they can control the largest supply of conventional oil left in the world.

[Graeme]

Desu, The US can't do it.

How Long Can the U.S. Oil Boom Last?

While low prices may only temporarily throttle expansion of oil fracking, the underlying geology—deeply buried shale rock that contains diffuse hydrocarbons—looms as a more fundamental limit on fracking's future. Recent projections indicate that by decade's end or a few years after, U.S. oil production from fracking will likely flatten out as supplies are depleted.

"A well-supplied oil market in the short-term should not disguise the challenges that lie ahead," International Energy Agency (IEA) chief economist Fatih Birol said in releasing the IEA's 2014 World Energy Outlook.

The IEA report projects that U.S. domestic oil supplies, dominated by fracking, will begin to decline by 2020. "As tight oil output in the United States levels off, and non-OPEC supply falls back in the 2020s," the report says, "the Middle East becomes the major source of supply growth."

nationalgeographic

[Graeme]

Everything Has Changed: Oil, Saudi Arabia, and the End of OPEC

Saudi Arabia’s decision not to cut oil production, despite crashing prices, marks the beginning of an incredibly important change. There are near-term and obvious implications for oil markets and global economies. More important is the acknowledgement, demonstrated by the action of world’s most important oil producer, of the beginning of the end of the most prosperous period in human history – the age of oil.

In 2000, Sheikh Yamani, former oil minister of Saudi Arabia, gave an interview in which he said:

“Thirty years from now there will be a huge amount of oil - and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.”

Fourteen years later, while Americans were eating or sleeping off their Thanksgiving meals, the twelve members of the Organization of Oil Producing Countries (OPEC) failed to reach an agreement to cut production below the 30 million barrel per day target that was set in 2011. This followed strenuous lobbying efforts by some of largest oil producing non-OPEC nations in the weeks leading up to the meeting. This group even went so far as to make the highly unusual offer of agreeing to their own production cuts.

The ramifications of this decision across the globe, not just in energy markets, but politically, are already having consequences for the global landscape. Lost in the effort to understand the vast implications is an even more important signal sent by Saudi Arabia, the owner of more than 16% of the world’s proved oil reserves, about its view of the future of fossil fuels.


The owner of the most valuable fossil fuel reserve on Earth just started discounting for a future without fossil fuels. While they would never state this reasoning publicly, their actions speak on their behalf. And that changes everything.

theenergycollective

[DesuMaiden]

Considering that the Middle East contains 3/5 to 2/3 of all of the oil reserves on the planet, it will always remain central to world oil markets.

[radon1]

http://www.presstv.ir/Detail/2015/02/08 ... l-terminal

Iran launches world's largest floating oil terminal in Persian Gulf

Iran has launched the world’s largest floating oil export terminal in the Persian Gulf waters.

The 2.2-million-barrel floating oil storage unit (FSU), dubbed the Persian Gulf', came on stream in Soroush oil region on Sunday.

The FCU has the capacity to take in some 200,000 barrels per day of heavy crude oil produced in Iran’s offshore oil fields of Soroush and Nowruz.

The floating terminal has a length of 337 meters, a width of 60 meters and a height of 33 meters.

The launch of the FSU will significantly increase Iran’s capacity for crude oil storage and exports.

Iran’s total in-place oil reserves have been estimated at more than 560 billion barrels, with about 140 billion barrels of recoverable oil. Heavy and extra-heavy varieties of crude oil account for roughly 70-100 billion barrels of the total reserves.

[DesuMaiden]

Considering that nearly 2/3 of all of the proven oil reserves in the world are located in the Middle East, it is no surprise that it would remain central to world oil markets.

[Graeme]

OPEC turning on the oil taps about more than just market share

OPEC's masterminding of the world oil market is leaving Canada to wonder where exactly our reeling energy industry fits within the scheme of the cartel's strategic thinking.

By leaving its production targets unchanged at its semi-annual meeting in Vienna this week, the Organization of the Petroleum Exporting Countries is sticking with a measure that will continue to bleed competitors around the world.

In Canada, the fallout of the oil shock is already something of a national preoccupation. The idea, then, that our oil industry, at least in the mind of OPEC kingpin Saudi Arabia, is just some happy collateral damage likely won't do much for any lingering traces of our bygone global inferiority complex.

"Obviously, we weren't the main target, but anything that slows overall growth of non-OPEC production is good in the eyes of the Saudis," said Vincent Lauerman, the director of energy and the environment at the Conference Board of Canada. "Taking us down a couple notches certainly supports their end goal."

The rationale that OPEC's move away from production quotas last November, which cratered global oil prices, was a cannon shot in the battle for market share is certainly valid.

Many birds with one stone

That said, squeezing the competition by keeping the oil market oversupplied is only one of the kingdom's many objectives. For the Saudis — whose wants can be taken as synonymous with those of OPEC despite the fractious nature of its various factions — the real elegance of this latest oil price war is how it serves so many of its purposes with a single stroke.

Politically, the Saudis would like to contain Iran's growing sphere of influence in the Middle East. The military action in Yemen is only the latest manifestation of the tension between the two countries.

"The enmities between Iran and Saudi Arabia have never been more intense or more dangerous than they are today," said longtime OPEC watcher Atif Kubursi, a professor emeritus at McMaster University.

The benefits of being the world's lowest-cost oil producer, as well as having hundreds of billions tucked away in a massive war chest, allow the Saudis to weather low oil prices with an eye towards longer-term goals.

cbc

[Graeme]

How plunging oil prices have created a volatile new force in the global economy

He’d spent years touting his vision that America would one day dominate one of the world’s most powerful markets. And when Harold Hamm, a pioneer in discovering vast reserves of shale oil under American soil, took the stage in front of several hundred oil luminaries, he never acknowledged that the narrative was in doubt.

“For the next 50 years, we can expect to reap the benefits of the shale revolution,” Hamm said one day this spring. “It’s the biggest thing that ever happened to America.”

But away from the stage, the US oil industry – and Hamm – was in crisis.

In the previous six months, Hamm, founder of oil giant Continental Resources, had lost $6.5bn, more than one-third of his net worth. The industry that Hamm had helped create was facing its greatest test in a frantic race to stay profitable as rival Saudi Arabia worked to drive down oil prices and, according to some analysts, undermine America’s oil industry at the most important moment in its history.

Behind the low price of a gallon of gas at the pump this summer lies a competition worth trillions of dollars that is capable of swinging the geopolitical balance of power. On one side are Hamm, a famous wildcatter, and other American oilmen who rode the discovery of hydraulic fracturing to tens of billions of dollars of wealth and a promise of, in Hamm’s words, ending the “disastrous” days of Saudi Arabian control. On the other are the Saudis and their allies in the Organisation of the Petroleum Exporting Countries (Opec), which are trying to stem rising US oil power and maintain their 40 years of dominance.

theguardian