Is The Oil Implosion Supply Or Demand Driven? Here Is The Very Simple Answer, Thanks To Saudi Arabia

Tyler Durden's picture

There has been much debate whether the crude price implosion has been due to excess supply or not enough demand. Here, courtesy of the oil minister at the world's largest crude supplier, is the answer:


Which, of course, to anyone with even the most rudiemntary logic and charting skills, should not come as any surprise.

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fightthepower's picture

Fuck you Bernanke!

Neverstopprintingme's picture

so that chart means buy stocks?  that would make a great hill for my kids to sled on too.

stewie's picture


I am sorry but the assumption that the decline in oil price was caused by a sudden change in supply/demand doesn't fit the data.  The oil price decline mirrors exactly the raise in USD.  The correlation is obvious to anyone who wishes to see it:

Furthermore, the drop in the Rouble is contrasted against other OPEC members's currency which remained comparatively unchanged such as the Kuwati Dinar and the Saudi Riyal.  AAMOF, the Riyal has been pegged to the USD for ever with nobody caring.  No my friend, this is economic warfare in it's simplest and most obvious form.  

Grab your popcorn because the BRICS have a strategy and it might just work: 

I am a Man I am Forty's picture

"I am sorry but the assumption that the decline in oil price was caused by a sudden change in supply/demand doesn't fit the data. "


No shit, couldn't agree more.  Tyler!  Tyler! Tyler!!  You are wrong on this one.

blaireauhedge's picture
blaireauhedge (not verified) I am a Man I am Forty Dec 18, 2014 4:08 PM

Just on this one?

fx's picture

A saudi gvernment official is of course a highly trustworthy source. LOL! Their claims about NOT arming Syrian rebels and about haviung NOTHING to do with ISIL are also pure truth,of course. WTF?


RaceToTheBottom's picture

Very nice article you linked.  So china is saying that at most the dollar is still a transactional medium, just not a store of value.


Well, one of two isn't too bad.....




Soon will be zero out of two

RaceToTheBottom's picture

"For reference: the turnover of the market of paper gold, only of gold futures, is estimated at $360 billion per month. But physical delivery of gold is only for $280 million a month. This equates to a ratio of trade of paper gold versus physical gold to 1000 to 1."

Oh my.....

Q-Q-Q's picture

Political ego and protectionist driven

Nex's picture

Mostly political manipulation driven.

noben's picture
noben (not verified) NoDebt Dec 18, 2014 2:46 PM

... keeps benefiting from low oil, low gas, low copper, low PM, and tROUBLED Russia.

Could all be a coincidence though.

Philo Beddoe's picture

Where dat IQ chart be at.

Nex's picture

China in september or october consume more oil but that don't stop plunge. And i don't know why everybody talking about China.?! Even if China slowdown in growth rate, that is normal because they more develop, but that is enormous even on 5% from this base, they will consume more oil because growing middle class.

NoDebt's picture

It's not simply how much China's increase in oil consumption is, it's how much China's increase in oil consumption is RELATIVE TO EXPECTATIONS.  When viewed from that perspective, they're way off from where oil producers expected them to be.

The US, in comparison, is on a slow downward trajectory in oil consumption, but that's already known and largely expected.

From a global perspective, oil producers were expecting MORE growth in oil consumption (which didn't happen) and MORE disruptions on the supply side (which also didn't happen).  This all happened at a time when storage facilities were already stuffed to the gills with oil.

blaireauhedge's picture
blaireauhedge (not verified) Dec 18, 2014 2:47 PM

Yeah, right. Kerry and Obama visited Saudi Arabia earlier in the fall to windsurf and play golf in the desert.

JustObserving's picture
Is The Oil Implosion Supply Or Demand Driven?

Neither.  It is economic war against Putin and Russia:

The Oil Coup

US-Saudi Subterfuge Send Stocks and Credit Reeling

John Kerry, the US Secretary of State, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.” (Stakes are high as US plays the oil card against Iran and Russia, Larry Eliot, Guardian) 

U.S. powerbrokers have put the country at risk of another financial crisis to intensify their economic war on Moscow and to move ahead with their plan to “pivot to Asia”.

Here’s what’s happening: Washington has persuaded the Saudis to flood the market with oil to push down prices, decimate Russia’s economy, and reduce Moscow’s resistance to further NATO encirclement and the spreading of US military bases across Central Asia. The US-Saudi scheme has slashed oil prices by nearly a half since they hit their peak in June. The sharp decline in prices has burst the bubble in high-yield debt which has increased the turbulence in the credit markets while pushing global equities into a tailspin. Even so, the roiled markets and spreading contagion have not deterred Washington from pursuing its reckless plan, a plan which uses Riyadh’s stooge-regime to prosecute Washington’s global resource war

McMolotov's picture

"Everything in the world is interdependent and once you try to punish someone, in the end you will cut off your nose to spite your face."

SelfGov's picture

More bullshit.

How exactly is this secret deal also sinking the prices of copper and coal and a bunch of other commodities that are following the same pattern?


chinoslims's picture

Sinking oil prices = rise in dollar.  Everything is priced in dollars. Also the end of US QE means less expansion of money supply.  Throw in less demand as evidenced by GDP slowdown.  Voilà. Rise indollar cheaper commodity prices

Fix-ItSilly's picture

Kerry now gives permission on pricing?  lol!

Saudi's #1 customer, US, has replaced mucho, mucho Saudi supply with domestic production.  Bangladeshis, Indians and Chinese can't up their incremental demand paying US prices. So the price falls to what can be afforded without money printing.

It's really that simple.  No need for conspiracy theories.

Goldbugger's picture

If GLOBAL slow down is occuring then why oh why are the markets now rallying. Because the FED says patience. WTF.

U4 eee aaa's picture

I don't think I'll be believing a word that comes out of that guy's mouth no matter what he says

vyeung's picture

The only people getting mortally hurt is the US shale sector. Everyone else is hurt but not mortally!

RaceToTheBottom's picture

Interesting that all these smart people the US has in the oil industries could be so wrong about the ability for the shale oil to last.  It appears that they are hugely off in their estimates as to how long each hole works or more accurately how fast each hole's performance degrades.

If you want a conspiracy theory, how about the US undertaking a fruitless shale endeavour, just to assist in the flooding of the oil market to hurt Russia and stop its pro Gold tendencies.  Saudis are just Round II.  But at the rate the US shale fields are crumbling, it has to play out fast!!!!


SillySalesmanQuestion's picture

Excessive splooge pumping...

FuzzyDunlop21's picture

there is not enough demand to meet their excess supply

madcows's picture

so why keep producing at the same pace....

Hmmm.  Russia's economy is predominantly oil exports..  A falling oil price hurts them, enormously... Saud is our "ally".  Saud agrees to punish Putin.

Or.. SA doesn't like all the competition from america and canada and the rest of the frackers.  It costs SA much less to extract their oil, so they keep production high, drive down prices, and drive the competition out of business... much like standard oil did to their competition long ago.

Slurm's picture

It's both.


Saudi's really wants to kill the shale oil industry.

Saudi's wanted the CIA to call off the ISIS dogs before they took over the kingdom.

USofA really wants to kill Emperor Putin.


Operation Black 'Oil' Swan was green lit and Mr. Ed was there to deliver the message personally back in Sept.

Saudi's are proving themselves usefull, once again.


P.S. Mr. Ed is heading to S.A. this weekend to discuss 'Iraq'. 

Paper CRUSHer's picture

The fed will drop"transitory" and return to the good ol' Greedscam era of just a "soft patch" goldilocks economy.

Long Larry Kudlow "mustard oil".

Jack Burton's picture

If lack of demand is crashing oil, then the big lie of a global world recovery from 2008, driven by central bank money printing, is a lie.

Thus stock market valuations are an even bigger LIE!

Please show me where I am wrong here.

Usurious's picture
Usurious (not verified) Jack Burton Dec 18, 2014 3:03 PM

I dont know which lies to believe anymore............


Nex's picture

Incredibly that ZH constantly posted this nonsense. In morning oil was up because USA, and despotic oil kingdoms from Persian gulf, want send message to Putin but he don't want to accepted now that and oil price plunge after. Everyone can track messages from Persian gulf despots and US agencies, they are coordinate and Yelen know that so she said: it's transitory.
Don't even try to find fundamentals or technicals, not exist.

centerline's picture

Thought it was futures driven, not supply and demand.

RealistDuJour's picture

Well I, for one, will take with a grain of salt whatever an Arab state has to say on the argument of supply vs demand... 

Jack Burton's picture

Also, if Saudi is right. Excess capacity and a crash in demand. Then expensive oil, Fracking and Tar sands, Deep Water Drilling and Arctic Shelf Oil, these industires are  fucked.

Tar Sands oil cost 10 time more to produce than Saudi oil

Fracking run from 5-7 times more to produce than Saudi oil

Ocean drilling can be a wide range, but is many times more expensive than Saudi oil.

If you are long Junk Bonds of the frackers and tar miners, you are screwed.

RaceToTheBottom's picture

Also in addition to the cost of Fracking, the reduction in performance of the holes is way beyond what was originally thought for Fracking.  Since we have paid for those with Junk bonds, they are hosed.


Of course we can bailout all that industry as well.

nakki's picture

Yes let's listen to some fucking royal asshat from The house of Saud.

Roger Shermanator's picture

B-bu-bu-but CNBC, the Fed, and the Obama Administration are saying that the U.S. economy is going gangbusters and achieving escape velocity...

Casserole of nonsense's picture

Naturally, if SA were manipulating the price of oil to use as a weapon they would just say that and not use the economy as an excuse...

NubianSundance's picture

Saudi output has been constant over the last 2-3 years, it's lack of demand that is driving down prices.

Obama LaForge's picture

Wait just a Goddern second. Remember ISIS selling black market oil at a 3rd of the price? That's what it is. Thanks, ISIS! It's the ISIS stimulus.

I am a Man I am Forty's picture

so 1/2% in gdp growth equals 50% cut in the oil price, got it, moving along

wrs1's picture

Well most of the shale haters are happy to grasp any nonsensical explanation no matter how stupid it is and the writers here continue to churn them out or repeat them as published elsewhere.