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When all the fracking proponents told us that increasing drilling would lower the price at the pump for Americans, I don't think this is what they had in mind... Saudis are saying they can go as low as $20 a barrel and still not cut production. Maybe they're just grandstanding, but before this is all over, a lot of these smaller players that went "all in" on the Bakken are going to get crushed.
When all the fracking proponents told us that increasing drilling would lower the price at the pump for Americans, I don't think this is what they had in mind... Saudis are saying they can go as low as $20 a barrel and still not cut production. Maybe they're just grandstanding, but before this is all over, a lot of these smaller players that went "all in" on the Bakken are going to get crushed.
Well, exactly. Back in mid summer, the Saudi family announced they were going to artificially drive prices down so that they could knock out all of the small companys. Their idea, according to the article, said that it is easier to control and maintains a small number of companies and that with the U.S. tracking, too many company's were springing up, and they needed to cut those numbers. I guess its difficult to price fix, or run numbers games, when there are a large number of players.
I have a stock broker family member who is telling me that the oil price per barrel goes 50 to 40 , jump in and buy co. s like exxon..... from the same guy who told me to buy apple when the first i phone came out !
When all the fracking proponents told us that increasing drilling would lower the price at the pump for Americans, I don't think this is what they had in mind... Saudis are saying they can go as low as $20 a barrel and still not cut production.
Sort-of. They pump the oil at a ( smaller ) profit, but if you think of the Saudi government like an American corporation, they have bills to pay, equipment to maintain, etc. and $20/bbl isn't enough to prevent them from dipping into their reserves.
The Saudi's have the world's third-largest ( liquid investment ) reserves on the planet, but they don't want to dip into that for very long.
Quote:
Originally Posted by attentionspanltd
Maybe they're just grandstanding, but before this is all over, a lot of these smaller players that went "all in" on the Bakken are going to get crushed.
More likely, they are going to get bought.
The majors like Exxon, Chevron, Conoco are not really in the shale revolution at all ( Exxon is in gas ). This is because the smaller players moved too quickly for them and locked-up the acreage.
Now, they can come in and buy the bankrupt and close-to-bankrupt companies to increase their reserves. They'll probably do so as asset purchases so they don't have to assume much of the debt out there.
The Saudi's are pretty stuck. They could firm-up the price by cutting production, but they want to do whatever maximizes total revenue.
example:
Is it better to sell 100 bbl @ $50/bbl ( $5,000 )
or should you sell 80 bbl @ $80/bbl ( $6,400 )?
Lots of articles out there believe that the goal is not to punish US producers ( a losing proposition ), but to punish Russia, Venezuela, and as a bonus, Iran.
In the mean time, the price of Bakken crude will get support over time because of increased rail capacity, more pipelines and exports.
I think your order is reversed. The Saudi's don't have much of a beef with Venezuela other than being a bigger cheater on quotas under Chavez. I would say Iran is 1, Russia (Asad backer) is 2 and Venezuela is 3.
Don't forget that the hedge books of Saudi Aramco aren't well known but it is known that the Saudi "rainy day" fund is about 870 bln. While that keeps the US govt. running for about 4 months, that is enough to run Saudi Arabia for about a decade, roughly. If Saudi Aramco put in hedges at $100-$120/bbl, they'll be just fine but sink whatever counter-party has to pay that difference in spot price. The question is what bank or banks were dumb enough to play this game. That is a HUGE financial contagion that may or may not exist. Banks are well known for having stupid people at the switch because they graduated from the correct business school but never learned anything about risk(Lehman & Bear).
It remains to be seen who will invest in pipelines from ND as ND's real crude markets are not in Cushing, OK. They are on the coasts and pipelines really don't go East-West in this country unless they go through Houston or Cushing.
It remains to be seen who will invest in pipelines from ND as ND's real crude markets are not in Cushing, OK. They are on the coasts and pipelines really don't go East-West in this country unless they go through Houston or Cushing.
The Sandpiper will move 20% of current production to the East Coast.
It's important to note that Bakken oil is the best oil on the planet. The measure of "best" is how much gasoline an diesel a bbl holds by weight/volume. Since much of the gulf coast refiners have grown up around Venezuelan oil ( a low-quality oil ), they are tooled to process that stuff and not the good stuff.
It's also important to note that any new capacity additions to move oil out of ND raises the price since right now, there is a huge discount for Bakken crude due to the shipping bottleneck. A builder of a pipeline doesn't really care that much what the price of oil is, since they are paid to move the oil. They don't buy it or sell it.
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