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Saudi Arabia Surprises Market With Supply Cut Announcement, Oil Jumps
Saudi Arabia, it appears, had enough of shooting itself in the foot for its American 'partners', and has admitted for the first time that it slashed supply in September. As Bloomberg reports, OPEC’s biggest producer cut supply to mkt by 328k b/d in September to 9.36m b/d, from 9.688m b/d in August, according to a person with knowledge of Saudi Arabia’s oil policy. Prices in September were flat admit this supply cut which suggests along with the build in EIA inventories seen yesterday that Saudi Arabia may have also been forced by global demand weakness to cut supply through October also.
It appears the Saudi supply cut in September offset any demand weakness as prices remained flat... which makes one wonder what the plunge in October represents (global demand weakness or a flip-flopping Saudi Arabia?)
The intrday reaction to the first public admission of supply cuts
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Remember what I said that world will reduce supply of raw materials due to QE?
Saudis:
Lower the price
Reduce output
What is the plan?
Easy. Force oil in storage held as uber rehypotheticated collateral for repo and derivatives to dump into the consumption market, same as in 2008.
Prepare for oil margin/collateral calls
Filled up my car yesterday...score one for the good guys!
It costs me $32 to fill my car up, saying that i do live in the Arab Emirates
Vlad thanks them.
+1 for the golf club
Saudi's really screwed the pooch on this one, they weren't supposed to cut output until after the election.
errr, camel.
Hmmm... I wonder what ISIS is getting for a barrel of oil nowadays?
Oil for arms.
Oh wait, somebodies already doing that.
It's just a game like everything else...
Someone's "Winning".
my best friend's mother makes $80 /hr on the internet . She has been out of a job for seven months but last month her check was $12348 just working on the internet for a few hours. you can try this out... YelpTrade.com
Sure but how does that relate to Saudi Arabia reducing price and supplies?
I think he got you
I am the sucker being born every minute.
You can actually set your clock by it.
Don't be tto hard on yourself, the "my bestfriends mother" trick is a curveball ;-)
I know a guy who has an illegal immigrant chained up in his basement and makes more than this. Your best friend's mother has obviously not been motivated properly.
Is she a MILF?
Prolly not.
They just tried to slam silver under $17, but silver said, "Oh no you di-int!!!!".
to be exact it was 12345$
And so what do you do, Castbound? Sit on your ass all day? Get back to work.
East producing less or West consuming less?
Saudi Arabia supplies reduced (limited) stock for less price? Sure but what if somebody needs more? Other plaeyrs can always put the price up then??!
i.e. Your competitor stops selling, you can always put the price up!
Low prices will force oil in storage to be released to drive the price furhter down (within your scenario)?
You sure its not a demand issue?
Ohh sorry, Demand is always infinite, like you said the other day. My Bad!
Natural law of nature:
Demand is infinite
Supply is scarce
That is why money exists. If supply were not scarce, money would not exist.
Money exists because central banks have the entire world in a giant headlock...
ISIS has plenty of oil.
Wants, dude, NOT demand!
Demand requires ability and willingness to pay,
Which is diminishing in the West due to unemployment, pay cuts and excessive debts.
Hence, people still want that new gadget or car but CANNOT DEMAND it as they DONT have MEANS TO PAY for it.
Hence West is not buying raw materials for production form the East.
HENCE East is reducing supplies AND giving DISCOUNTS on top!
Demand = Wants
Ability to pay = Ability to produce
WRONG.
DEMAND = Ability to produce.
Ability to pay = printing money.
Hence, we can deduce:
Ability to produce = Ability to Pay.
Which proves why the world is abandoning the USD and Saudi Arabia is producing less at lower prices and all their competitors have got their pop corns out.
We can do this all night, champ.
This is coming down to who is infallible:
You, I or the Pope?
Answer: None of you.
Well that statement Shirley piqued my interest. ;)
IMV it's boiling down to the "Mother" of all battles. :(
"Ability to pay = Printing money"
That is why people are clueless about economics. So typing up digits on computers means ability to pay?
No, ability to pay is NOT about printing money. Money is not edible.
Ability to pay = Ability to produce
Who said anything about printing money? (I was just being factitious in that post btw)
Printing money is just extension of credit by another means i.e. somebody else issuing and signing your checks on your behalf.
Somebody, at some point, will either have to pay (by producing something aka slave) or default (and hide behind a big gun).
Wants are infinite. Ability to pay for those wants is not.
Demand is NOT infinite...
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=M
He believes in Abiotic oil, so on his planet, demand is infinite.
On mine, its just lulz.
Demand is infinite
When I produce nothing and depend on the supplier to extend me credit all the time, than the supplier reduces supply.
Isnt this just an act of aggression by the Saudis, and if so, who is likely to react? Isnt this just crucifying the bank cartel, the shale boom industry, the entire middle east budget.......
What is the benefit to Saudi?
Control
Saudis are more powerful than banking cartel.
They don't want control of oil price slip from them
And it was out of control because price was beyond $110? meaning the competitors can gain market share?
Or is it to implement pressure to control the outcome of Syria and the negotiations with Iran?
Price was $110 because banking cartel had amassed an insane quantity of oil
So they get it from Saudis and put it back in storage.
So, it goes from underground to underground.
What is the point of it?
Think hypothetically.
Assume Saudis extract 100% of their oil which goes underground somewhere in USA.
Who would be in control?
So you reduce the price, so the Chinese can also do it on the cheap?
How can they buy saudi oil if saudis decided not to sell oil to them?
You still think there is a free market?
Is that a joke?
Didn't know Saudi's were the only suppliers of oil in the world.
So the pain in Shale was too much to handle?
How much junk debt finances shale?
educated guess-too much, boom, bust, shakeout coming...
junk debt for land leases that will never make the return
But CD makes the best point perhaps. "We" can always produce some kind of hydorcarbon but increasingly, as resource moves decreasingly, these companies cannot produce and sell it at a price the market can bear and they can survive.
That's what I would call a "tap on the shoulder".
Great! i covered yesterday ...
then, its time to reshort it. this bump will be quickly faded. operation destroy russia (via oil) is going full force ahead.
EKM1 just said this on the CAT board. Interesting call:
http://www.zerohedge.com/news/2014-10-23/how-caterpillar-just-blew-away-...
"And it will get worse and worse.
As I predicted in May 2013, world would start to reduce raw material supplies to the west. Saudis have already started reducing oil supply and lowering the price simultaneously.
Those billions of barrel held as collateral by big banks uber rehypotheticated to for repo and derivatives will have to dump now.
Supply chains are breaking down, precisely due to QE."
yeah very interesting ... are you the same person posting on different accounts? WHY? this is not a contest even if you made a good call who cares??? do you have a blog or smt ... better pimp that
Not the same. EKM1 has been posting a rather different perspective than many here for some time...some views closer to reality than others. Regardless, I find it helpful to look at disparate views that may have otherwise been unknown as possibilities and form my own opinion on the overall picture.
Because the information asymmetry and misinformation warfare is so bad, the puzzle building requires one to at least have all the correct pieces on the table among the otherwise massive number of superfluous ones.
EKM1 just said
"And it will get worse and worse.
"Supply chains are breaking down, precisely due to QE."
We know that already, infact have known for a long while, but his reasons for it are a bit of bullbutter.
Yes, the reasons may very well be bunk, as that part of the story is quite hidden. So, what are the reasons for the breakdown? It'd be helpful for the board that one not only call out someone's reasons for the breakdown but also stating what they are in one's view.
Oil is a finite resource and its peak oil playing out.
IF, for arguments sake, you say you dont believe in Peak Oil:
Still their are production limits, in terms of logistics, refining etc and cannot keep up with the exponential population growth.
Okay, for arguments sake, lets say, fuck the population, if you dont get it, tough luck:
But still then there remains the debt saturation issue and the exponential increase in the money supply needed to keep the system (aka Ponzi) to remain growing and stable.
When ponzi stops growing, its starts collapsing.
Okay, for arguments sake, lets say its not a ponzi, but a divine system designed by the people doing God's work:
Even then the interest on the debt keeps growing and reduces the disposable income leading to demand destruction leading to supply constrictions, which is we are seeing.
Once you have bought the whole world, on mortgage or leverage, how are you goign to service yoru debt?
Certainly agree with this view of debt saturation. I don't see how the two views are incongruous, but what the actual actors are doing as an ancillary thread and theme inside the overall debt saturation theme.
debt/growth ponzi continues til the faith beached, then i don't care how much oil u have i'm busted ass broke and can't buy a drop. does that sum it up?
edit;unless i have a military to take it from u by force til that goes bust by dolla demise(trust breached)....either way merica on the path of self destruction...
Oil will still close down today. Damn shame.
Deflationary, nobody's got no money outside of the major cities, therefore demand drops more than supply, hence lower prices for the few consumers who can afford to fill.
Cut your [supply] chains and be free my brothers.
WTI was up 2$ now only 1 Brent also up 2 now only 1.5
it's so funny how admitting the obvious can change a trend. what would the market do if, say, the federal reserve held a press conference and admitted they'd been using the banks to repress PMs, and that this was necessary for American interests, so they planned to continue it? would that boost the PM price?
How'd it work with Treasuries??
Guess they need the money more than they need to put shale into hibernation.
Brent's price did not fall at the same rate as WTI.
To be sure, Brents price will increase at the same rate as WTI though.
Seems shale oil really need price above 80. Pretty funny.
Saudi Arabia better becareful, ISIS could be deployed into the Kingdom very easily.
man the RTylers are just gonna keep fucking this chicken until there's nothing left but feathers... Pooty Poot must really be taking it in the shorts for the drums to be beating this loudly
we have action in a chart on 64k volume for a bid of 81.43, an ask of 81.45, an open of 80.42, a low of 80.05 (ahem), and a close of 81.44... and this is supposed to be some huge action and swing up due to Saudi activity?
where's the swing that breaks 90 on panic volume? call us when that happens, until then who gives a shit?
"...the RTylers are just gonna keep fucking this chicken until there's nothing left but feathers..."
Dude, I have been laughing for 15 min over this. Good shit and good points!
No kidding, let ISIS head towards the oil fields and suddenly the game will change. They'll put some skin in the game. Till them let 'em eat their fucking oil.
How to say Boomerang in Arabic?
Saudis can cut production because the have a few rials tucked away, but it's a big world out there and as long as there are a few producers who have to pump to keep chitlins on the table, like Iran, prices can go lower.
This might cause ...um... disruption in the ghost inventory business and some malodorous whiffs of 'credit events'.
There will also be a slight stench of backdoor bailouts as well.
Credit events are verboten.
9.4 million b/d is now their limit full out. They are unable to maintain 10 million...
All downhill from here!
Saudis are the world's great fence sitters. Watch where they end up with BRICS. They only have to wait a little longer until the U.S. is simply no longer relevant, and the demise of the dollar is certain.
Arrest Prince Bandar.
See this ... this right here. This is why I'm out of the market and will stay out. If I want smoke and mirrors I'll go see David Copperfield.
Or were they "asked" to cut production???? WTI hit $81 yesterday, and we have t remember that the "Tight oil" being fracked out of the Bakken field in Montana / N Dakota has a production cost of $90 / bbl. Was someone losing money???? could they influence the Saudis well enough???
These prices should be enough to spread some pain around. I don't see how Saudis are shooting themselves in the foot nearly so much as how they are shooting Iran, Venezuela and Russia. I expect they will keep the market orderly. Cutting some supply to shoot the prices up every now and again will keep the markets honest.
From Reuters, "OPEC's largest producer pumped 9.7 million barrels per day (bpd) in September, up from around 9.6 million bpd in August, an industry source said on Thursday.
But the amount of crude the kingdom supplied to domestic and export markets fell to 9.36 million barrels, down from around 9.69 million barrels in August. Barrels not supplied to the markets are put into storage.
"I think this is a knee-jerk reaction," said Christopher Bellew, a broker at Jefferies in London. "Saudi Arabia has not cut its overall output."
And there was this, "Libya said Wednesday it expects oil production to reach 1.5 million barrels per day by year-end, with output quadrupled since the beginning of the summer despite ongoing chaos in the country.
“We will continue advancing,” National Oil Co spokesman Mohamed al-Hrari said.
He said production had reached 810,000 barrels per day by Wednesday, compared with 550,000 at the end of August and 200,000 at the beginning of the summer.
The next target is one million barrels per day by the end of September."
With oil falling from $100 to $80 per barrel, Saudi GDP is set up to take a hit of $65 billion or 8% of GDP. Let's say the Saudis cut production by a million barrels a day and oil goes back to $100 a barrel, do they win? Nope, they would have less oil revenues due to less product, and revenues would still fall by $36 billion per year, and that is a 4% hit to GDP.
With the U.S. projected to produce 1.3 million bpd more oil in 2015 and Libya set to bring back another million bpd and the EIA predicting only one million bpd more consumption in 2015, the Saudis looked at an even worse scenario. What if they cut oil production and the price didn't move? They would be hit with a $100 billion loss in revenues.
Longer term, the Saudis get that as of now shale oil production has only caught on the U.S. If it catches on worldwide, the Saudis are in huge trouble.
Everyone thinks the Saudis have this endless supply of money. The U.S. is/was the #1 customer in the world for oil. As early as 2020, the U.S. may be exporting crude that competes with the Saudis. How does that not spook them?
The Saudis no longer have control of oil prices. What they say that they are going to do with regards to production is irrelevant.
Why does everyone think the House of Saud will go on forever? I have a strange feeling I will outlast the House of Saud.
Oil Jumps?
Brent crude $86.20 and U.S. crude $83.25 Oct 22, 2014
Brent crude $86.20 and U.S. crude $83.25 A Barrel Now http://www.reuters.com/finance/commodity?symbol=GB@IB.1