Saudi plans spending cuts, reforms to shrink budget deficit

Thrugelmir

Generali wrote: »

My take on things is that the Saudis and Russians realise that oil will have very little value in a couple of decades and so are getting as much out as possible.

With current production levels , coupled with the fact that Iran will soon be exporting again and Indonesia is looking to become an exporter rather than a net importer. What's to be gained by cutting production in Saudi. As simply keeps more US operations afloat. No one else can match production costs of $6 a barrel except Venezuela. North Sea may well be a casualty. If low prices persist.

purch

Mistermeaner wrote: »

So please explain the deeper nuances to me.

Thud...................... :eek:

Generali

purch wrote: »

Thud...................... :eek:

<shh>I think (s)he was in on the joke too</shh>

DiggerUK

Mistermeaner wrote: »

I'm puzzled. The US does what the US believes to be in the US best interest.What smell test doesn't that pass.............

Because they claim to desire an inflation rate kissing 2%. Raising rates won't get inflation anywhere near that. Don't forget, inflation is the primary method governments have of ridding themselves of their borrowings.

A stronger dollar won't help exports and US business grow.

Lower oil prices help those who buy oil products, but oil producers, especially those who are pegged to the dollar, are not going to be best pleased.

I differ with those here who see the world economy on the mend. It's a boom with legs, that's all.
So when the recent fed rate rise was high fived by the usual suspects, I found myself looking on in amazement at the lack of a broader examination that questions the silly reasons given for the rise by the fed..._

Thrugelmir

DiggerUK wrote: »

Lower oil prices help those who buy oil products, but oil producers, especially those who are pegged to the dollar, are not going to be best pleased.

Any day the first tanker will leave the US with the first export of oil since exports were banned some 40 years ago. As a consequence will Saudi now abort it's 30 year tie to the US$. Given that this is sweet crude that Saudi used to export to the US. Now it's head to head for the biggest share of this particular market.

DiggerUK

OK, I'm stretching things a bit, but the USA is also pegged to the dollar!
What the game plan of the fed is with a move that strengthens the dollar is still way over my head.
And none of those who were high fiving with gay abandon about the rise, have given any reason for their excitement, or revealed how they have benefited.

But it's time to wash me bits, and get ready to welcome in a new year.
Exuberance here I come...

CLAPTON

DiggerUK wrote: »

OK, I'm stretching things a bit, but the USA is also pegged to the dollar!
What the game plan of the fed is with a move that strengthens the dollar is still way over my head.
And none of those who were high fiving with gay abandon about the rise, have given any reason for their excitement, or revealed how they have benefited.

But it's time to wash me bits, and get ready to welcome in a new year.
Exuberance here I come...

one would assume the FED has raised interest rates (by a minute amount) because they think that underlying inflation is rising:

they will be anticipating that the dollar will strength, imports will be cheaper and that their exports will be more expensive

not sure that anyone greeted it with high fives but why is this a cause for conspiracy theories?

cells

Generali wrote: »

My take on things is that the Saudis and Russians realise that oil will have very little value in a couple of decades and so are getting as much out as possible.

why would that make any sense?

A iplod 6 will be worthless in just five years but apple isnt selling them for $100 a pop when the maximum profit figure the market will bear seems to be closer to $1000 a pop

you would still try to maximize revenue/profit

cells

padington wrote: »

I wouldn't be surprised if some state actors have got wind of a new oil disrupting technology on the verge of showing its hand.

Hydrogen perhaps ?

No

it is shale oil and gas

the Russians and OPEC ignored it and dismissed it as an expensive environmentally unsound rapidly declining limited resource fad.

In 2014/15 they woke up to the fact that within about 5 years the Americans took the technology to over 5 mbpd oil and was still increasing by about 0.1 mbpd per month.

the fear must have kicked in, what if other countries follow america and develop shale? It would not take many countries to do what america did to completely swamp the market. At $100 oil maybe shale could have expanded to 30 mbpd and OPEC might have seen its market share decline to zero.

$100 oil is no good if your exports are nil.
So better to crush prices to a level where no one else tries to do shale oil/gas and hopefully even the american shale drillers get burnt.

So I dont think it was at all to do with oil being worthless soon due to something replacing it. It was to do with a vast new resource discovery one that was for now limited to north america but was certainly to be found on every other continent once companies started to look for it


thats my guess

cells

there was a lot of things that happened to be timed close to each other over the last three years

the massive new shale fields and production in the USA with a big risk of other nations developing their own shales.

Iran coming back onto the market

Oil efficiency in Europe and USA (cars and regulations improving)

Huge excess of NG in north america pushing down global coal and then gas prices

Risk of huge excess of NG being converted to oil (there was a serious proposal for the largest NG to oil facility in the USA)

Governments subsidizing into existence a non-trivial amount of wind and PV

LED technology finally becoming good quality (good light) and affordable. General improvement in electronics. Pushing down electricity usage.


with hindsight you could argue once NG prices in north america crashed there was no other choice but for coal and oil to crash too. For a while I thought the Americans would build a huge quantity of NG to oil plants and convert $10-15 NG into $30-45 oil and that boeing would bring online LNG aircraft so they could use the ultra cheap NG. but of course it makes a lot more sense for the current oil producers to cut prices in half rather than let NG eat into their cake