No spat with Iran gets in the way of the cash!
Saudi Arabian Oil Minister Ali al-Naimi said the kingdom, the world’s top crude exporter, does not limit its output and has the capacity to meet additional demand, state television Al Ekhbariya reported on Wednesday.
“The increase in production depends on … the demand of the customers. We meet our customers’ demand, there is no longer a limit to production, as long as there is demand, we have the ability to meet demand,” Naimi said.
The Wall Street Journal, which reported the same comments as Al Ekhbariya, also quoted Naimi as saying Saudi Arabia’s oil policy was “reliable” and would not change. He has made similar comments in the past when asked about plans to boost production.
On Monday, Saudi Arabia, its finances hit by low oil prices, announced plans to shrink a record state budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatisation.
Saudi Arabia’s planned cuts in spending and energy subsidies signal the kingdom is bracing for a prolonged period of low oil prices which this month hit their lowest levels since 2004.
It looks like Vladimir Putin and the ayatollahs are preparing to corner the world’s oil supply – literally.
Last May I wrote on this site that Iran was in the process of surrounding the Saudi/Wahhabi oil reserves, along with those of the other Sunni Gulf petro-states. I added that, “Iran’s strategy to strangle Saudi/Wahhabi oil production also dovetails with Putin’s interests. As the ruler of the second largest exporter of oil, he would be delighted to see the Kingdom’s production eliminated or severely curtailed and global prices soar to unseen levels. No wonder he is so overtly supporting Iran.”
(Reuters) – As a test of wills between OPEC nations and U.S. shale drillers fuels a global oil market slump, a brewing battle between Canadian and Saudi Arabia heavy crudes for America’s Gulf Coast refinery market threatens to drive prices even lower.
While the stand-off between the oil cartel and U.S. producers of light, sweet shale oil has captured the limelight in recent months, the clash over heavier grades – playing out in the shadowy, opaque physical market – may put even more pressure on global prices that have halved since mid-2014.
Two factors will come into play over the next few weeks: From the North, new oil pipelines will pump record volumes of Canadian crude to the southern refineries, many better equipped to process heavy crudes than lighter shale oil.
From the Middle East, top exporter Saudi Arabia is offering crude at discounted prices in an attempt to defend its remaining share of the important regional market, which has shrunk by more than half in recent months…
…The looming clash of barrels comes at a time when oil markets already face a global glut expected to last for a year or longer.
Large volumes of foreign heavy oil reaching the Gulf Coast will give many U.S. refiners more choice after they have upgraded their systems to process cheaper, heavier crudes. The new supply also marks a breakthrough in Canada’s years-long effort to bring its growing Alberta oil sands crude output to new markets…
Gasoline prices are on the verge of crashing down to below $2 a gallon. The price of oil may dip below $50 a barrel.
Even with renewed demand from a global economic resurgence, energy prices continue to fall. The U.S. has suddenly become the world’s largest combined producer of oil and natural gas.
That fact — along with a desire to weaken hostile Iran and Russia — has prompted the oil-rich Gulf sheikdoms to keep pumping oil even as the price falls. In their game of petro-chicken, the desperate sheiks hope that either their poorer enemies will run out of cash, or that fracking in the U.S. will become unprofitable and cease.
Everyone seems to have forgotten about “peak oil” — the catchphrase of the new millennium.
“…The problem with the Saudis’ low-price strategy is that it hurts OPEC, too. Its 12 member states are not created equal. The ones in the Gulf – Saudi Arabia, Kuwait, Qatar and the United Arab Emirates – probably have the financial muscle to endure low prices for some time, perhaps a few years. Not so the weak OPEC members – Venezuela, Nigeria, Libya and perhaps Iran. The world of $60-(U.S.)-a-barrel oil is pushing them toward the fiscal cliff. If OPEC falls apart, it won’t be because it has lost control of a market swimming in American oil; it will be because the low-price policy is sabotaging the economy and finances of a few of its own members. OPEC is becoming a cannibal family, one that eats its own…”
The ruble is collapsing. Russia’s currency fell to a new record low of 73 rubles to the dollar on Tuesday after opening 8% stronger following Russia’s central bank raised rates by 650 basis points to 17% at 1am.
In a worrying sign for the Bank of Russia, the currency remains volatile quickly reversing the morning’s gains and snapping back to move over 12% weaker from its opening price at the time of writing.