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Page added on December 29, 2014

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Saudis hit ‘panic button’ at $40 oil

Saudi Arabia has insisted that OPEC will keep oil production at 30 million barrels per day no matter the cost of crude, but even the world’s biggest oil exporter has a limit, the CEO of Breitling Energy told CNBC on Friday.

“I think the panic button is at $40,” Chris Faulkner said in a “Squawk Box” interview. “They can say whatever they want, but at the end of the day, they can’t just bleed out money forever.”

With the Saudis’ deficit for 2015 projected to reach $50 billion—the official figure is $39 billion—the country’s leaders will face challenges in maintaining its subsidies, he said. Young people will not stand for planned wage cuts, either, he added.
That said, Faulkner expects oil prices to rebound to the low $70s by the end of 2015, after initially sliding further into the low $50s and possibly recovering in the second quarter.

With oil prices at current levels, Venezuela will likely default on its debt payments due in March and October, Faulkner said.

Brent crude for February delivery traded below $61 in morning trade on Friday.

Faulkner sees natural gas remaining below $5 until 2020, as the supply and demand fundamentals are unlikely to change significantly.
Natural gas dipped below $3 on Friday for the first time since Sept. 24, 2012.


18 Comments on "Saudis hit ‘panic button’ at $40 oil"

  1. Makati1 on Mon, 29th Dec 2014 7:45 am 

    Question: If the OPEC countries make up their loss by spending their reserves. And,if those reserves are in USTs, how will the sale of perhaps hundreds of billions of USDs of Treasuries, next year, affect the US economy? Seems to me that the boomerang will be a big one on the Empire. Not that the empire has managed anything else except shooting itself in the foot for the last 15 years.

    Just askin’.

  2. rockman on Mon, 29th Dec 2014 7:59 am 

    There is no panic button for the KSA. They (more specifically the world class consultants they’ve retained) will try to calculate the price at which the KSA will receive max revenue. First, as has been proven many times, the KSA has no ability to force OPEC members to cut production levels. Thus, as in the past, it will be up to the KSA to make cuts. But cutting production may or may not increase the price of oil. In the 80’s the KSA cut their production by 70% only to see prices continue to be low.

    Second, even if a KSA production cut des increase oil prices it doesn’t guarantee the KSA will see higher revenue then when prices were lower. KSA revenue will simply be their bopd X $/bbl. Unless the oil price increases enough they’ll see lower revenue at the high oil price. Finding that sweet spot of price vs sales volume has never been easy.

    And the big uncertain factor is to what degree of demand destruction are the global economies going thru. A cut in global oil production won’t increase the price of oil if the economies can’t afford to buy enough of the cheaper oil. Let’s use 2008-09 as a good example. Oil prices fell from a yearly average of $98/bbl in 2008 to $58/bbl in 2009 and the world consumed less oil then it did in 2008. IOW in 2009 the oil producers had much lower revenue in 2009 than 2008 even though they were selling at a 40% lower price. In fact had they sold their oil for the same $98/bbl as they did in 2008 they would have still seen lower revenues.

    As always price is not the sole determinate of how much oil is consumed. The ability of the global economies to pay for what oil is in the market has as much, or more, control then the price alone.

  3. Industrial mercenary on Mon, 29th Dec 2014 8:05 am 


    I guess to start this off you have to know a little bit about me…i am a one man industrial revolution…all i do is prepare for the future….all i do is prepare for the collapse of industrial civilization/Peak oil…I am still an athiest-but learning…..
    I was approached by evil…they offered me a queen ect…i declined…after i made the choice i sat there in the dark alone….far off in the distance i found a tiny little dot of light like an “led” that was in what i called (Upper Space)..i was wearing my business suit and sunglasses floating up into a tunnel of rainbow lights.God showed me dinosaurs clash in a titanic struggle for life,i saw the entire history of the earth and my place in it….god showed me multiple futures of my one i had become this totally righteous monster of a super hero…there was a war between humans and aliens–i was in space wearing a space suit like a force field,dodging space junk…there was this battery and god was like it’s charged…the weapon is ready….eventually i was killed totally painlessly in a flash of light…a bomb so powerful it blew the sun out of orbit hit me and many other people.
    After the visions of the future stopped i was sitting there horrified by my own righteousness…i talked to the evil forces that were there,everyone was horrified, both good and evil.Evil runs this world,and i trusted there wisdom…my only real concern was that i will work for evil so long as you know that i am good and when i die im going to heaven…everyone said okay and god i sat there in the dark the forces of evil scared me as i wondered “did i make the right choice?”…..that was months ago and now im fine and still good:)…im working on this red lawnmower and it’s pure evil,it shocked me yesterday and it doesn’t want to live:( im trying to bring peace between good and evil every day now.

  4. Makati1 on Mon, 29th Dec 2014 8:10 am 

    Maybe the answer?

    “Chart Of The Day: OPEC’s Export Revenue To Plunge From $900B To $450B”

    Or not? Where will they get the $450B? Sale USTs?

  5. bobinget on Mon, 29th Dec 2014 8:57 am 

    As usual, I’ll take an opposing view.

    Saudi Arabia, eventually USA, not Venezuela, not Russia, not Canada, not Algeria, not Iraq, not Iran, have most to lose in this battle of giants.

    KSA is already facing INTERNAL pressures that, as a matter of course, always build in Police States.

    Because of collateral damage caused by KSA’s
    ideological warfare with Iran, The Kingdom lost
    OPEC leadership position once enjoyed.

    Syria remains in the Iranian/Russian orbit.
    Libya, the next Syria, is like S. Sudan, another oil failed state.

    Russia, Iran, Venezuela, Equador are begging China
    to be “Petro Colonized”©
    By this time 2015 because China put its
    massive funding to work corralling future oil supplies well into this young century.

    That the US loses Venezuelan 2.5 M Bp/d oil nothing less then certain. Daily, we are being inundated by breathless reports of Ven’s up coming defaults. China has so much invested in
    the former US oil colony, it’s too late for China to back down now.

    Russia, Iran, go to China for “petrofaction”©

    At the end of the day the US needs to Annex Western Canada or be dependent on Russia, China
    and Iran.

  6. bobinget on Mon, 29th Dec 2014 9:00 am 

    That should read “Petrotection”©

  7. rockman on Mon, 29th Dec 2014 9:14 am 

    “OPEC’s Export Revenue To Plunge From $900B To $450B”. And adjusted for inflation that’s $50 billion more in revenue then they had in 2005. And that $450 billion in 2015 revenue is twice their revenue in 2002. And let’s not forget that’s the exact revenue they had in 2009 after the price crash at the end of 2008.

    And the KSA: est. revenue 2015 = $191 billion. Planned budget = $229 billion. KSA oil export revenue 2009 = $140 billion. And 2008 = $260 billion. And in the 2007 the KSA revenue was $170 billion.

    IOW the KSA oil export revenue in 2015 is projected to be the third highest oil export revenue the country has earned since they began exporting oil. And that $38 billion short fall for 2015…I think they can cover it: “At present, the surplus funds of Saudi Arabia are mostly invested abroad by the Saudi Arabian Monetary Agency, which had net foreign assets worth $733 billion in October. Most of that money is believed to be in low-risk US dollar assets such as US Treasury bonds and bank accounts, which tend to earn low returns compared to the more aggressive, higher-risk investments favored by some other rich oil exporters.”

    I don’t think I’ll lose much sleep over the financial plight of my Arab cousins. LOL.

  8. Apneaman on Mon, 29th Dec 2014 10:14 am 

    “Annex Western Canada” It’s not like you guys haven’t tried weaseling your way up here before. Good luck with that. Assuming it was possible it will be good for American moral if they pull it off, since you haven’t won shit since WWII. When we were helping you out. Oh I forgot, Panama and Grenada, two top rate, hard won successes. We’ll put a boot in your ass it’s the American way….

  9. bobinget on Mon, 29th Dec 2014 10:58 am 


    That annexing of Canada tag line was intended as cynical.

    How aboot we trade one of our warmer, waterfront states for Alberta? Mississippi perhaps?

  10. Mike999 on Mon, 29th Dec 2014 11:13 am 

    Get Rid of TEXAS, and it’s purchase of the US Congress and ALL of our problems are solved.

  11. Tim on Mon, 29th Dec 2014 12:21 pm 

    Hi All,

    Anyone know what happened to Davy? I miss his daily input.


  12. Northwest Resident on Mon, 29th Dec 2014 12:37 pm 

    Tim — Yeah, Davy has been AWOL. I suspect the Christmas/holiday period has something to do with it. He had talked about taking a sailing trip to the Bahama Islands before economic collapse sets in for real, and with the way things are shaping up he may have decided to just get it done. That might also explain his absence. Those are my guesses.

  13. Nony on Mon, 29th Dec 2014 1:13 pm 

    WTI is in the 53s and Brent in the 57s as of the time of this post. WTI even dipped down into the 52s briefly today.

    If we don’t get more war worries, we could see the 40s. The Libyan fire was not enough…

    Like the guy’s take on natgas also. Like the guy overall. Has correct analysis and is engaging on the air. Doesn’t say dumb things like “call a bottom” or “catch a falling knife”.

  14. ghung on Mon, 29th Dec 2014 1:21 pm 

    Yeah, NR, Davy mentioned flying to the Bahamas with the family for the holidays in a (their?) private jet.

  15. Nony on Mon, 29th Dec 2014 1:59 pm 

    Taking a little back on the accolades for Chris Faulkner. He’s a penny stock operator. His bio also doesn’t say where they heck he has worked and it seems like he did not get his degree despite attending 3 universities.

    I do agree that he is an engaging speaker and pretty common sense.

  16. Apneaman on Mon, 29th Dec 2014 3:11 pm 

    bobinget, so was my response. I am a Doomer supreme and thus attempt to hold it together by being somewhat of an Absurdist.

  17. Kenz00 on Mon, 29th Dec 2014 4:47 pm 

    KSA will NOT cut production alone…… It will take the slow down of shale, tar sands and deep water investments and production, as well as, agreed to cutbacks from other exporters like Russia and Iran then KSA will go along. They will not do it alone.

  18. 35Kas on Wed, 31st Dec 2014 3:46 am 

    Whats funniest of all is that when they finally graciously reduce their oil production to match lower demand and to increase oil prices, is that no one will notice that their actual possible oil output is going down.

    Their peak oil will be camouflaged by this event. TopKek indeed.

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