Re: Carbon Bubble Is Bursting
Posted: Tue 12 Jan 2016, 07:46:46onlooker wrote:dolanbaker wrote:The Saudi's have been on cruise control, relative to the US.
Yep Dolan is right from OPin 2010 US oil production was 8.6 million barrels a day, Saudi production was 10.8.
In 2014 US production was 12.5, Saudi 11.6.
So the US increase production by 3.9 million barrels a day, the Saudis by 0.8 and yet the Saudis get the blame for the glut.
For reasons best left to the imagination of the reader the so called West has just assumed that KSA would always be willing to take the hurt to balance supply and demand. From the KSA point of view the collect we of the west insisted that they should give up some of their market share so we could maintain our oil industry from stripper wells on the bottom to fresh fracked multi completion wells at the top. Well they proved in 1986 they were no longer willing to do that to support their fellow OPEC members cheating on the quota system, but apparently the memo never sunk in with the thought processes of many financial 'leaders' around the westernized countries. Instead they have created a slew of theories about how 'low' oil prices are destroying the economies of every OPEC nation plus Russia, despite the fact that all of them were managing just fine in 2005.
Any of the three largest producers, the USA/Russia/KSA could end the glut today by declaring a modest cut in production. ROCKMAN tells me it is still legal for the TRRC to declare a production level for every well in Texas, which would put a pretty solid limit on USA production. For Russia and KSA it is even easier for the people in the decision making capacity to declare a cut. The simple fact is it doesn't even have to be a substantial physical cut, just announcing a cut and proving you mean it would cause the speculators to rear up and stop depressing the price of oil. Oil yesterday was at a 5 year low and was selling for less than half of year ago prices. So far every drop that has been offered for sale has found a buyer, even if it went straight into storage.
Here is my prediction for whatever it is worth. One of two things is about to happen, either the oil producers run out of buyers because we hit that 'tank full' moment and nobody has any storage capacity left they can fill which will crash the price, very temporarily. Or on the other hand some combination of events, could be natural declines catching up, a war disrupting sales, or a big player declaring a new floor price they will defend, will put a bottom on the price declines. KSA used to do that frequently just to promote stability even when they did not do anything else to effect their production. KSA or Russia announcing they will not sell for less than say $40.00 would mean giving up a little of their market share, but the price would stabilize with a large portion set at that price. There simply is not enough capacity anywhere willing to sell to replace the Russian or KSA exports, in fact there has not been for a very long time, say around 2000.
