Saudi Arabia Ready For $20, $30, $40 Oil

Tyler Durden's picture

Submitted by Colin Chilcoat via,

Brent crude and West Texas Intermediate (WTI) fell 2 and 3.3 percent respectively to start the week and Saudi Arabia is prepared to go much lower in a bid to trim the fat. Oil Minister Ali al-Naimi said as much in an interview with the Middle East Economic Survey on Monday. Naimi defended the Saudi position and made clear that OPEC nations will not cut production at any price. His comments dismiss any notion of collusion with the United States and spell trouble for producers everywhere.

Since its November meeting, OPEC production has remained relatively steady while trending upward. Libya has had a few slip-ups and Venezuelan production is hurting, but the 12-member cartel exceeded their collective target for the sixth straight month, pumping 30.56 million barrels per day (mbpd). The price however, has fallen roughly 20 percent in that period and shows no sign of returning to its June highs.

For its part, Saudi Arabia accounts for nearly one-third of current OPEC production, or approximately 9.86 mbpd in the month of November. Still, production capacity is nearing 12 mbpd and Naimi suggested the oil-rich nation might put it to use sooner rather than later. It’s all part of a plan to demonstrate that high-efficiency producing countries deserve the greatest market share – an idea Naimi describes as the operative principle of all capitalist countries. OPEC produces around 40 percent of global output, but non-OPEC production is projected to grow 2.3 percent next year after a 3.5 percent expansion this year.

Non-OPEC Liquid Fuels Production

Source: EIA

Naimi’s argument obviously ignores the significant geopolitical factors present in oil trade, but is nonetheless a worthy defense. Among the non-OPEC low-efficiency producers, Saudi Arabia aims to squeeze out Russia – who they mentioned specifically – and particular plays across North America, where non-OPEC growth has been most rapid.

In Russia, President Vladimir Putin and Rosneft head Igor Sechin project calm despite the downward march of nearly every significant indicator of economic health. As the government searches for solutions to the ruble’s disastrous final quarter, Russia’s five leading oil exporters are under orders to sell part of their foreign exchange revenues in the next few months. The EIA predicts Eurasian production will see a drop of approximately 100,000 barrels per day (bpd) into next year. Energy Minister Alexander Novak has yet to revise his production outlook, but admits oil exports will decline by 4.3 percent in 2015.

In North America, efficiency is not really the name of the game. In 2013, US shale accounted for approximately 20 percent of world oil investment while supplying only 4 percent of global production – numbers Naimi would deem unworthy of a market share, even if that market is domestic. The side effects of oil’s decline are less evident to date, but that is not to say they have been completely absent. Despite overall growth, the EIA has lowered its expectation for US production in 2015 by 100,000 bpd. Layoffs are already underway at Halliburton and more are expected elsewhere. In all, US exploration and production spending is projected to fall by more than 35 percent if WTI averages $65 per barrel or below into 2015.

North of the border, Canada believes it can weather the storm. The oil sands, while more capital intensive up front, operate on much longer timelines than shale projects and those already online can breakeven at $40 per barrel. Even so, a handful of Canadian oil companies are slashing their 2015 capital budgets and reducing output forecasts.

It’s unclear whether or not OPEC and Saudi Oil Minister Naimi are simply trying to put a scare into markets long enough to defend their market share – and if they can even keep up in this game of chicken – but the scare is there and the advantage is theirs.

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dbTX's picture

It's a demand issue, not a price issue anymore

zuuma's picture

Ohhh... dang.

Please don't make me buy dollar-a-gallon gas!!

Anything but that. Ohh pleeeeease, Mr. Arab oil man.



sun tzu's picture

Wait until they put the shale and other producers out of business. You'll be paying $5/gal gas LOL

roadhazard's picture

lol, no. If the price goes back up the shale oil starts again.

Squid-puppets a-go-go's picture


the collapse of the leveraged shale industry will have all the relevant fingers burnt for years, and by the time the investors are ready to jump in again, the disasterous environmental effects will have been plainly evident long enough for public opposition to have grown significantly.

then you have the horror stories coming from the poor farmers who signed contracts with fracking producers, and they will organise better and demand more when shale industry round 2 comes about

new game's picture

squid, wrong - it is called consolidation with bargains on top drives,

warm stack outs will keep the flow by solid players. cold stack out will be the reduction needed to get this fucking crazy boom back to balance with reality(and maybe repair a few roads).

obviously you have NEVER been to ground level ND...ha...

new game's picture

click on directors cut...

quit playing know it all when your full of shit...

PermaBug's picture

you're wasting your time talking reality to these people. They don't want to hear it. Every market is rigged, every price is controlled, every move is planned, and EVERYTHING leads to TEOTWAWKI.

Between you and me though, I love the idea the Saudis (and other OPECers) will sell their crude on the cheap, and we can keep ours stored up for when prices rise again to economical levels.

The idea that investors won't dive in again is laughable. Look at the housing market! Didn't I just see a zh headline about subprime all over again?

Just one more of the dozens of contradictions touted here every day, lol.

IronForge's picture

Oh, yeah.

KSA has the Will and the Money to sit out and wait to buy up every bankrupt Shale-Fracking, Sand-Scrubbing, and High-Cost Petrol Op after they bottom out the Market.

They have all the Money and the Gold.  The USD is pretty much nothing to them due to all the QE.

wrs1's picture

What do you know about those of us who own shale and produce it so you can drive your car?  KSA can take a shit and eat it.  There will be a tariff on their oil or Texas will secede and use it's own oil to power it's own economy and then where will the rest of the US be?  Paying $200/bbl for Saudi oil.  

IronForge's picture

Last time I checked, the FreeTraders have cut down Tariffs.

Also, KSA is in the Lead Seat at OPEC; and is controlling the Px.

It'll take a good while for TX to secede - you have the risk of all the illegals jumping in on the bandwagon to take advantage of the situation.

Good luck with those...

Escrava Isaura's picture



This has nothing to do with the Saudis.


This had to do with the collapse of the Petrodollar if the BRIC’s (mainly Russia and China) plans of owning the oil, pipelines, and manufacturing succeeds.


I believe US will crash the prices of all commodities thus bankrupting the BRIC’s nations.


Shale is just a side casualty easily fixable by some type of TARP program……. If the dollar remains the global reserve currency.


The Wizard's picture

The manipulation of oil supply and its price is for a multiple of reasons, one being a torpedo aimed at the BRICS. However, the reason the manipulation is successful in the short run is because the petrodollar continues to be the basis for exchange. This is exactly why the BRICS and most other nations are teaming up with them to bring down the petrodollar thus creating a new basis for valuing international exchange rates. Once this takes place the ability to bankrupt any nation by NATO is eliminated.

I believe JC Collins has a pretty good analysis of the situation with his blog

Nexus789's picture

The only nation that will be bankrupted will be the US - all the others have real tangible assets - lots of gold, copper, iron, oil, gas, etc. The US has lots of fiat currency. A US 'war' on other countries will have blowback as countries will deliberately default and this will flow back into the US finanical system. The world is fed up with the perfidious Washington.

wrs1's picture

The US has lot's of that other stuff too, particularly oil or haven't you missed the point of this article?

COSMOS's picture

Yep there was just a story on yahoo news about lawmakers coming up with help for shale towns and the help for shale companies wont be too far off.

Jumbotron's picture

I said a few weeks ago in response to a story posted by Tyler from some dickcheese anal-cyst who stated that there would not be a bailout this time when shale oil went south financially.  To wit I called Bullshit and offered my suggestion that the legislation would be wrapped in the flag and patriotism and called "The National Energy And Security Act"


It was supposed to be a joke.


Dubaibanker's picture

The Great oil price war : Saudi Vs USA!

It is my opinion that the price of oil is down mainly because it is all about the country/group which controls the highest supply of oil and hence dominates/controls it's price and thus we have this rift between 2 of the world's biggest oil producers today being Saudi vs USA!

The price of oil will go lower to USD 30-40 at the minimum (could even go below USD 30) and will not go up for at least the next 12-18 months until US oil production does not come down and increases the market share of OPEC/Saudi. So, we have a long way to go, before US/Canada/UK/Norway etc oil production (but mostly US) actually reduces.

Until now, Saudi and US were great friends but due to the rapidly rising production of oil from US and the lack of dependence by US on ANY country for their oil demand, we have arrived at this juncture, where Saudi/Middle East had no other option but to wipe out the privately owned US shale oil production by any means possible else Saudi/Middle East would lose the only main reason why they are still relevant on a global scale and part of G-20 etc and move into oblivion over the coming years.

US used to depend on Saudi and Middle Eastern oil but ever since 9/11 this dynamic has changed twice. Immediately after 9/11, US reduced oil purchases from Middle East, removed their army base from Saudi and started buying majority of their oil from Canada. However, since 2009, US oil production has risen by 100% and if US dependence on Saudi / UAE / Kuwaiti / Iranian / Nigerian / Iraqi / Libyan oil is reduced and Chinese influence keeps growing then we will see more unrest in the Middle East than it already is in 2014. US has reduced oil purchases from Nigeria too by over 90% and from Canada as well and is energy independent and has now become a net energy exporter by virtue of the gas that they produce and if Saudi had not played this card of price reduction to increase/retain their/OPEC market share then US would keep dominating global markets and end up controlling the price of oil in years to come.

There can only one king in the jungle as far as the oil supply is concerned.

We will see below that the pressure points and collapses in the last 3-4 months have all exclusively been in US, UK, Norway, Canada etc i.e. in the western world. The world's 3rd largest fuel oil supplier, OW Bunker, has gone bankrupt last month in Norway. Shale oil stocks in US have declined by over 90%. US and UK oil companies are cutting costs, firing employees before Xmas time and stopping production.

"Less than a week later, the company filed for bankruptcy in Copenhagen; it will be liquidated, undone by a client that it says didn’t pay a $125mn bill and by an ill-timed bet that oil prices would rise, Bloomberg Businessweek reports in its December 15 issue." 

If we forget everything else and just see who has gone bankrupt or who is firing employees or whose stocks are down or where the banks are in trouble, we will see one picture that this crisis (due to oil price decline) is having the greatest impact in US, UK, Norway, Denmark, Canada etc (and not in Saudi/Russia/Iran/Iraq/Venezuela/UAE/Kuwait/ Angola etc). 

This proves the point that Saudi and OPEC are bringing oil production down in order to hurt the US oil production and everything else (including Russia, Venezuela, Iran etc) is a by product of the same. None of them will hurt as much as the oil sands and other producers in USA or Canada.

This is the great oil price war of 2014-2015 and is aptly titled Saudi vs USA!

 This collapse is just the beginning, it will get a lot more worse after Jan 2015 for the next 6 months.

The chart below compares Saudi and US oil production and it is clear that US oil production has already grown to more than Saudi Arabia. This is the main thing that Saudi does not like. This is a 30 year chart since 1983 and US is producing more oil than Saudi since this year which confirms my thesis above. This is a very important chart purely because it shows that US has produced more oil than Saudi for the first time since at least 1990.

 You can see the same chart of US oil production from Deutsche Bank issued end of Nov 2014 which Bloomberg reporter called the 'Time Person of the Year' and some have called it the Chart of the Year.

This chart indicates that US is producing more oil since at least 1985 that is almost 30 years!


As we all know, if US produces more oil and is as dominating as Saudi, this means that the supply has risen dramatically which is the second reason why the price of oil has dropped dramatically. We technically have a glut of oil production and not enough demand due to unemployment, bankruptcies of airlines, shipping companies, global crisis leading to slow tourism in Thailand, Ukraine, Europe, Middle East such as Jordan, Lebanon, Egypt, Bahrain etc (except Dubai).

Just today, Saudi and UAE have said that oil price decline is because everyone else is producing more oil so why should only OPEC cut oil production. This clearly indicates that Saudi is holding its position not to reduce its market share.

Today's FT article and the video inside it is a must watch if you wish to understand what I am saying. You may have to hear the video from the 2 FT analysts very carefully because they do say that everyone should cut oil production and Saudi is holding its position (which is also my position) not to cut in order not to reduce market share but wants others to cut their production as well and firstly (which indicates they are taking about US who is the largest producer along with Saudi).

Saudi Arabia and UAE blame oil rout on countries outside Opec

Escrava Isaura's picture



Dubaibanker, what can I say?.......

When you play your ‘A’ game, you seem to leave everyone behind.


Anyway, a few things that I disagree with you:

Agree, the price of oil, and every commodity will go down, and down hard. Dollar will look good in 2015. But, once shale peaks in 2015, even that it peaked in 2014, US economy (standard of living) will be, officially, finished.

I understand that you will find it hard hearing it from the other side of the world, I am assuming you’re in Dubai, but consider this writings by Professor Patzek:

A better way of looking at it, is to subtract the actual oil production from the population-based projections and calculate the unrealized oil consumption.

By this standard, the peak of global per capita consumption happened in 2005, and we now live in an era of permanent destruction of consumption.

The US and EU consume more per capita, have exported their manufacturing elsewhere, and are unable to withstand the high price of oil.

Hence the destruction of demand for 1.6 million bbl per day that already happened in the U.S. A similar destruction trend will continue to happen in the future, because the U.S. can no longer compete for expensive oil with China.


So, my oversimplified point that challenges some of your views:

1) Saudi Arabia is with the US because NO one can defend Saudi’s elites better than US and Israel.


2) US controls prices, and most foreign governments as needed. Look at the price of gold and oil. Look at NATO.


3) Business going bankrupted is nothing compare to the coming US empire collapse


4) Shale is NOT oil. Saudi Arabia has nothing to worry. Condensate versus conventional oil (CvsC)


5) US natural-gas, by Jeffrey J. Brown:

Of course, it’s when, not if, that the production from new wells can no longer offset the declines from existing wells, i.e., Peaks Happen.

Year over year, from July, 2013 to July, 2014, the industry was able to offset declines. US dry gas production was 70 BCF/day in July, 2013 and 70 BCF/day in July, 2014. However, at about a 24%/year decline rate, we need about 17 BCF/day of new dry gas production, every year, just to maintain current production.

To put this in perspective, Canada’s 2013 dry gas production was 14 BCF/day. Based on the Citi report, in order to maintain current US dry gas production we need to put on line the productive equivalent of all of Canada’s current dry gas production, every single year, times 1.2. Or, over the next 10 years in order to maintain current dry gas production, we need to put on line the productive equivalent of 12 Canadas.


6) Canada Tar-sands have few years left…. Before it dies for good  

“Canada requires 200 Tcf of natural gas to burn its tar sands. But Canada’s total reserve: 58 Tcf.” — Roland Horne




wrs1's picture

Here is what LTO looks like right out of the ground.   It isn't drip, it's oil with a very high API, it's super light.  The oil in this picture is API 53.   I have other wells that produce black oil in the range of 38-41, this stuff is much nicer and smells terrific.  We don't even need Saudi oil in the US, we could import any oil we lack from Canada at this point.   Mixing their tar sands with my super light sweet makes a good product for the coastal refineries.  The Saudis are pissing up a rope and short of them having a shooting war with us, they will lose this battle and without our weapons, they are totally naked.  A tariff is coming if they persist in what they are doing.

Dubaibanker's picture


You perhaps did not look at my 2 charts of trading economics or businessinsider, right in the middle of my first comment out of 3.

You will realise that Saudi production of oil has been LOWER than US for the first time in about 30 years. That has political, economic and monopoly control and fight written all over it. How can Saudi allow US to produce oil more than itself? Saudi will become irrelevant. You also did not address any of my points below in 2nd or 3rd comment of mine. 

US has not been buying oil plus has closed its base and Obama was kicked out of a dinner...these are not sign of 'friendship'.

Also Iran removal of sanctions is a problem - for Saudi - plus we know what happens to 'friends' of America. They end up dead, like Saddam or Gaddafi, so let us not go there on a public forum.

You have a right to believe that Saudi and US are still in cohoots but you have to prove it to me with some examples and not just your opinion please.

If you believe US controls price of oil, then please prove it how, because US certainly does not produce highest amount of oil. US extended support to Saudi and OPEC in the past with US pricing it in USD and OPEC following diktat and in return US provides military assistance. After seeing Syria, Libya and Iraq not to mention Afghanistan, Pakistan and Iran, who needs friends like the Americans?

US empire will not collapse, it will just keep slowing down. Debt can be written off or other partners can be brought along or a new currency can be created...

If Saudi had not brought this price down, US would be even a greater producer of oil in 2015 and then 2016. 

Since the production charts went above Saudi production and thanks to no purchase from Middle East, friendship with Iran, unrest in Syria and Libya and Iraq, Saudi had to do something and they have done.

Only time will tell in the next 6-12 months, whether I was right or wrong. But I am convinced that Saudi is doing whatever it takes for its own self survival and the desire to remain relevant along with its OPEC counterparts and I have shown several examples to prove my thesis.

wrs1's picture

I am a private shale oil owner and I don't like what the Saudi's have done and we have a solution for it in our consitution, it's called a tarriff and IMO, a $25/bbl tarriff would be appropriate on all imported oil.  Should the price go below $50, the tarriff should be increased $2 for every $ the market is under $50.  Then we will see how low the Saudis have to go in order to hurt honest Americans.  Make no mistake, what they are doing is dishonest in the extreme.  I have paid taxes and worked on military technology over the years that benefitted them and for them to do this now is unconscionable.  If you are a dubai banker, you should convey that from a 1 percenter here to whoever gives a shit over there if anyone does which I doubt.

FredFlintstone's picture

Isn't this called "dumping" and aren't politicians supposed to get upset about it?

wrs1's picture

Yes it is but it happens with timber too, which I also own and there isn't anything done about that either.   There are bigger interests than me, much bigger and I think they are being hurt by this and I think they will do something.  I know that Texans are not happy about this and if the people in DC sit on their hands, we won't.

PermaBug's picture

So your plan is for the US government to force the average taxpayer to pay a hell of a lot more for oil so that you can maintain your 1% status and or bail you out of a bad investment. When oil men are clamoring for more government intervention in the economy, you know there really isn't much hope for free markets and small governments, sigh.

wrs1's picture

The oil the Saudis are selling is below market and there are already heavy taxes on every gallon of gas you buy. Tariffs are in the constitution and are a legitimate form of protection for US business.  Maybe you think this guy should't make an above average wage?  He was making $175/day doing that during the frac job on my well and every other well my operator drills.  He was happy doing it and sending money home to his wife and kid so they could live a decent middle class life.  He made $9/hr doing that at a restaurant in his home state and he attended a culinary school.  He would gladly pay more for gas to get a better pay for doing a good job instead of living like a pauper on $9/hr.


I don't have a bad investment, I own the land and the oil under it.  I want to recoup the most I can from my resource and selling it below market because the Saudis are dumping theirs below market isn't right.  I didn't pay $435,000 in taxes last year to have the govt sit around and do nothing about it.   Like it or not, 1% pays 90% of the tax and I doubt you even paid 1/20th of what I did.

PermaBug's picture

The market price is what it is. Absolute BS to say the current prices in world markets are 'below market prices'. Makes no sense.

If it works to bail you guys out, why not put tariffs on everything? Bail out every failed manufacturer in the USA. Get all those jobs back from Mexico and China. What a great idea!

If you want to see your ideas implemented in full, just visit Argentina, or Venezuela.

I paid several million in taxes in my lifetime, never got much in return. I got tired of sending my hard earned dollars to undeserving whiners like you and the farmers.

Now I live outside the country for at least half a year every year, and my investments are all offshore, and yeah, I pay close to zero in taxes.

Makes me all warm and fuzzy to know my money is staying in my pocket and not going into yours.

FredFlintstone's picture

Oil guys and farmers are whiners to you? What a dick. I am neither, but know hard working, honest people when I see them. Enjoy your life in paradise.

Dubaibanker's picture


Please see Page 8 of this fascinating BP research which is the 63rd annual edition of global energy outlook released in June 2014:

US has reached 10.8% of oil production in 2013 and Russia is at 12.9% while Saudi is at 13.1% of global oil production.

 Due to massive productivity gains in US shale oil production, the US has really risen a lot. US has gone from 7,362m barrels in 2003 to 10,003m in 2013. Saudi has risen from 10,141m to 11,525m barrels only.

Even CNBC had published an article last month suggesting the rise of US power due to oil production:

US energy is growing, and so is US 'power'

These couple of paras can show you the strength of US oil production. I am sure Saudi did not like it. 

America's unexpected transformation into the world's biggest natural gas producer and one of the globe's largest oil producers will give the U.S. more geopolitical clout on the world stage—including in key relationships with ChinaRussia and the Middle East.

By 2020, the U.S. is likely to be energy independent, along with Canada, its biggest import and export partner. Add to that a new boom expected from a reforming energy industry in Mexico, and North America will more than hold its own as a powerhouse in the global energy market. 

The ripple, however, will be increasingly felt across the world. In the next several years, the European Union could be importing U.S. gas—and possibly even oil, if current laws change—lessening Russia's stranglehold on the European economy.

And, Saudi cannot let US become more dominating than themselves hence they had to bring the price of oil down rapidly.


There is lot of unrest in the Middle East from Syria to Libya to Iraq etc (all oil producing nations). Since this has been happening for a few years now, this unrest and some people have returned to Saudi and are causing issues. This is a very big problem for countries such as Saudi and UAE and they are taking preventive action. This is also another major reason why Saudi wants US to stop supporting any activity for or against any of the countries in the Middle East.

 Some of these people have entered Saudi and have been promptly arrested. 

 Saudi is very worried about security and potential for any unrest and this is another big reason why Saudi does not want US to be involved in any Middle Eastern issues and can only be dealt with if US gets into some financial troubles.


 Hundreds of people have been arrested in the last month in Saudi which coincides with the decline in price of oil.

 8 Dec 2014

Saudi Arabia Arrests 135 People, Including 26 Foreigners, Plotting To 'Destabilize The Country'

9 Nov 2014

Saudi authorities arrest 33 suspects over terror attack 


There are several theories running around that this is about Russia in the main media which are quite untrue in my view. Russia, Nigeria, Saudi, Kuwait, Qatar, Venezuela, Iran, Iraq, UAE, US, UK, Norway etc all will suffer with the decline in the price of oil. However, this is a by product of the bigger thing i.e. control over the global supply/price of oil.

Everyone will suffer including Saudi but there are two reasons why US, UK, Canada, Norway, Denmark etc will suffer more than Middle East, Nigeria, Russia etc.

a) All oil wells in Middle East, Venezuela, Nigeria, Russia etc are owned by the Govt. Whereas in US, UK, Canada, Norway etc they are all privately owned by private investors and private companies like BP, Shell, Exxon etc and hundreds of smaller companies.

b) Middle East, Russia, Nigeria etc earn a lot of budget surplus through oil and gas and this cash is saved as reserves for the last few decades as a cushion. This cushion is not available to private sector in US, UK, Canada, Norway. Hence, the private companies will suffer more.

 Eventually, the companies that suffer the most and will shut down which will be almost all be concentrated in the private sector of US, UK, Canada, Norway etc.


There are several examples just in the last 1 month that the impact is being felt much more in the private sector of America and UK etc than anywhere else so we must ignore the various opinions and noises in the media and look at the facts. We have not heard of any bankruptcies or job cuts or cost cutting in Middle East or Saudi or Russia but exclusively in the US, UK, Canada, Norway etc. Even the banks who will get impacted by severe losses will be Japanese or Canadian and US. You will not read any of the news below in any major media / newspaper because it does not fit the US agenda.  

Since Saudi, UAE, Kuwait, Qatar etc have cash reserves and no debt, then in order to survive this low prices, they can always use 'pre payment loans' / 'securitisation loans' which will be secured against future oil production and create new cash flows which option the US and UK companies do not have due to the existing amount of high debt.

And, this is just the beginning, not even the end. So such bankruptcies and major job cuts will keep continuing until it starts impacting other sectors as well.

The impact has been felt as far away as in Australia (a private company investing into US shale oil) where an oil company has shut down who was drilling for shale oil in Texas, USA:

Oil price collapse has claimed its first shale drilling company, and why this may not end well.

Second company exits Tuscaloosa Marine Shale due to low oil prices 

Halliburton to cut 1,000 jobs (Video)

 Billionaires like Carl Icahn in US have suffered too who did not see this coming.

 Oil’s Drop Hits Big Investors Hard

Icahn, Paulson Suffer Large Losses as Energy-Related Bets Sour

Big Investors Hit Hard by Oil Decline

BP to spend $1 bln on thousands of job cuts 

BP shares are running at same levels since 2002 and are lower for the year currently.

Thousands of British workers will lose their jobs. 

35,000 oil & gas jobs at risk as crude price tumbles – study

2 Hedge Funds also have shut down. 

Houston energy hedge fund AAA Capital to close at year's end

Shuttered Brevan Commodities Fund Caught Out on Derivatives

Commodities Strategies Fund With $630 Million in Assets Suffered Worst Hit in September 

Shuttered Brevan Commodities Fund Caught Out on Derivatives

Schlumberger has announced billions in cost cuts and job cuts. 

Global marine seismic equipment industry hit by collapse in crude prices

Schlumberger, the world's biggest oilfield services provider, has announced that it is to reduce the size of its geological survey fleet as it expects its customers to cut back on spending following the recent fall in crude oil prices.

The company is also taking a $800 million write-down on the value of its ships and cutting an unspecified number of jobs.  

WesternGeco, Schlumberger's UK-based marine survey arm, is set to reduce its fleet from 23 vessels at the end of 2013 to 15 at the end of this year, through retiring some of the older and higher-cost boats and converting others. 

The write-down will focus on the six ships that the company acquired as part of the 2007 takeover of Eastern Echo.

Falling crude means that a large number of projects would be uneconomic if given the go-ahead at today's prices. According to the FT, "crude at $70 puts at least 1.5m b/d of projects for 2016 at risk."

Norway Risks ‘Severe Downturn,’ Central Bank Governor Says

Mitsubishi UFJ, JPMorgan Are Top Energy Lenders, Citigroup Says 

Banks' $650bn bet on oil backfires as Brent prices slump

Lenders sitting on billions in losses after rise in risky debt to oil and gas companies raises prospect of impairments

While Barclays, HSBC and RBS could be sitting on losses of $1bn each, and Standard Chartered faces $400m of impairments, banks in North America could face much bigger impairment charges. 

US and Canadian banks that have lent heavily to the sector on the back of the US shale boom, and high-yield debt to less stable oil companies has increased substantially. 

This means a collapse in the oil price is far more dangerous for the banks than it would have been only a few years ago.

The Shape's picture

I was reading your little pull together and I have to call bull shit on the company that went bust. They were drilling the Mississippi Lime and that ain't in Texas. Secondly they were going bust even before the oil price declined. I took a look at them at one stage and they were run by overpaid idiots who kept talking up their horizontal wells when their declines told a different story. They were paying huge money to drill and got huge decline rates. They couldn't even increase their production to make it look like they'd outrun their debt.


Dubaibanker's picture

The Shape,

Sure. point well taken. Maybe they were a disaster to begin with. A price correction of anything from computers to oil to coal to airlines, hurts the weakest first....that happens everywhere and then they go bankrupt. Out of say, 10 companies, the 10th one which is the worst one, goes bust first, then if the pressure persists, then the 9th one will go bust and so on...the top one and top 5 will somehow survive...that is self survival and survival of the fittest....

Last time we found Madoff and Lehman in 2008, let us see what else we discover this time around.

You will also notice that it was very hard for me to find all the links of bankruptcies in US or Denmark or lay off and cost cutting of thousands of employees at Christmas time, they are all found in low life media or in random countries and I wonder why the US main media will not cover it? ;) 

Escrava Isaura's picture



Now, at this post:


Hope you don’t hate me to say that; but sorry Dubaibanker, but I am not buying into this propaganda.


You wrote: “By 2020, the U.S. is likely to be energy independent US”

Sorry, it ain’t gonna happen (not likely). How am I so sure?

Global Net Exports.

By Jeffrey J. Brown

The “Chindia Factor” ELM (or what I called ELM 2.0 at one time):

GNE have been slightly below 2005, but basically stable, but given an ongoing decline in GNE, unless the Chindia region cuts their consumption of GNE at the same rate as the rate of decline in GNE, or at a faster rate, the resulting ANE decline rate will exceed the GNE decline rate, and the ANE decline rate will accelerate with time.

GNE = Global Net Exports of oil
ANE = GNE less Chindia’s Net Imports



“There is lot of unrest in the Middle East “

And it will only gets worse. Middle East Population = 405 Million. But growing 2.9% yearly. Almost twice as fast compare to the rest of the world 1.2.


“Saudi is very worried about security …. can only be dealt with if US gets into some financial troubles.” 

 So, nothing good will come out of this



“All oil wells in Middle East, Venezuela, Nigeria, Russia etc are owned by the Govt. Whereas in US, UK, Canada, Norway etc they are all privately owned by private investors and private companies like BP, Shell, Exxon etc and hundreds of smaller companies.”

The largest companies will get rescued through loans, subsidies, procurements, and so on. The smaller will get decimated, as they always do.


“securitisation loans' which will be secured against future oil production” 

Very bad idea. Oil will become too precious to be placed in the hands of gamblers (usuries).


My Final Two Points:

First: On Oil

By Steven Kopits: Between 1984 and 2005 the world had a 25% oil surpluses. Since 2006, global oil production is declining.

From 2005 to 2013, the world spent $4 trillion dollars on upstream [not including pipelines, refinery, transportation, wholesale] exploration and production. And another $3.5 trillion dollars to maintain current legacy [fields]. Result: Oil production has fallen by 1 million barrels per day [mbpd].

For Comparison: Between 1998 and 2005, $1.5 trillion dollars spent added 8.6 mbpd.

To put into perspective: Germany GDP: $3.5 trillion dollars. So if you compare to 1998/2005 period, the world ‘vaporized’ the GDP of Germany on oil production. And the world still came up short 1 million barrels a day.

How challenging is the situation: 2014 Capex [upstream] Expenditures Trend: About $300 billion. Current forecast Capex: $193 billion. Over 30% decline. Shell, 2nd largest oil company in the world, not only cut capex by 20% but, since 2013, it has been borrowing money to pay dividends.


Second: On Financing

By Margrit Kennedy 

If Joseph the father of Jesus would have invested one penny at his birth at 5% interest, and Jesus would have returned to the same bank in 1990 - at the time of the German unification - he would have been able to buy, with the money accrued in the meantime, 134 billion balls of gold of the weight of the earth, based on the official price of gold at this time.

This shows mathematically that the continual payment of interest and compound interest over a longer period of time is practically impossible. And explains why we have economic and social breakdowns.,d.cWc



Dubaibanker's picture

I did not write that 2020 quote, it came from the CNBC article and I believe it is true, if not already true. 

Straight from the EIA, US is exporting LNG and Natural gas.

If US did not intervene in any of the Middle East, there would be no unrest. That was the point.

Using loans and subsidies to protect private enterprise is a fault within the US system. It is sad that you echo it. It can be taken to WTO.

Securitisation is as old as time.

If I have a cheque for rental receipts or gold production or oil production or whatever, if I can prove it has future prodcution or value, I can take  a loan against it. Whether I am saudi or russia or whosmeover. In US or UK they cannot because they are already debt laden to the hilt and are private enterprise and have no Govt ownership as backing therefore, the bottom ones will fail.

We just have to give space to Gazprom's and Sinopec's and Petrobras's of the world to enter the global chain, we cannot simply have British and US domination forever. and if they are not allowed to grow, then US and British will simply suffer a slowdown because new alliances will get formed like BRICS or SCO or ASEAN which will not allow US or British to remain relevant in the long run regardless of profitability or rough times because oil is a national interest of every single country, not just the US.

Dubaibanker's picture


There are some political hues to the whole oil price decline in order to bring the US shale oil production down.

One of the key pro American Saudi royals was Prince Bandar who was US Ambassador for 22 years and then was Secretary General of NSC from 2005 and then was also handed Head of Saudi Intelligence from 2012. He has been removed from this very important position in April 2014. This indicates the turning of the Saudi position against USA.

 End of an era as Prince Bandar departs Saudi intelligence post

 The second incident that prompted this disconnect with USA was the cancellation of a dinner between Saudi King and President Obama AFTER Obama landed in Saudi. This was in March 2014.


 You may even see a Fox News video on the link above.

 These two events are quite important because almost NO ONE cancels a pre arranged dinner with the President of the United States unless they are very angry and they are the Saudi King!

This indicates that the Saudis are angry over something and wish to move away from their friendship with the Americans. 

Another political hue to the Saudi-American unhappiness is due to the fact that US is trying to making friends with the Iranians. This causes lack of clout in the region by Saudi, especially given the fact that Iranians have a population of over 83m while Saudis have less than 29m and in addition US has closed its army base in Saudi, buys almost no oil and now if it befriends Iran then Saudi will not have as much clout left in the region.

Saudis and Iranians have had a few meetings in NY and Oman in the last few months. This also indicates that Saudis are hinting that the Iran-US deal will happen one day and it is best to make amends and make a relationship sooner than later especially where cooperation on oil prices on a neighbourly basis is concerned.

The fact that Saudi and Iran have had senior level meetings is of significance since they have had a difficult time for various reasons in the last several decades. Iran even requested Saudi to let prices go back up which indicates that Saudi is primarily responsible for the decline in the price of oil.

 Iran Analysis: Did Tehran Fail in Secret Meeting with Saudis Over Oil Price?


The impact of oil price will be felt by the Iranians as well as Russians along with a host of all oil exporting countries. Saudi is hitting many birds with one stone. They will temper Iran, weaken Russia etc who are also being hurt badly and have been part of antagonising Saudi due to their rising oil productions thus reducing Saudi market share plus the nuclear issue deal with Iran which will one day make Iran more powerful but will now slow down this process. Last year Saudi asked for Russian support in Syria but it did not work out.

 But all countries suffering are a by product of the main reason which is to bring US shale oil production down. Russian, Iran etc will not suffer as much because 1) China will help them, 2) all oil wells are Govt owned, 3) they have some cash cushion and 4) they can borrow a bit more against their future oil production.

However, Russia, Venezuela, Argentina have a back up plan which is help from China. Just this week, this news has hit that China will support Russia:

 Venezuela was given help just last month:

 Argentina also received billions from China 2 weeks ago:

 So, the Latin American countries and most other OPEC countries have enough cash and support from China in order to smoothen their rides.

 Thus Saudis/OPEC countries can increase their market share and at the same time weaken most other oil exporting nations who are privately owned.

 Here is another nice article confirming this view:

 Saudis Deploy the Oil Price Weapon Against Syria, Iran, Russia, and the US

 This is a second nice article confirming the same view below. The oil cost is the highest in Canada and US shale oil who will suffer the greatest!

 The Saudi Oil War Means Structural Sea Change; Risk-Off Turmoil Fuels Long Bond Strength

In the eyes of the House of Saud, US shale producers are the true mortal offenders. They alone are the ultimate threat. If the Saudis could thus target US shale producers and no one else, they probably would. But that is not how it works. The price of crude is global, thus price war fallout is global. As a result, for all the havoc US shale producers will face, others are being hit much, much harder by oil’s collapse.Consider the following chart showing average production costs for various crude oil producers (via the Financial Times):


There are two prices mentioned around the news for oil exporting nations. One is which includes the various subsidies and is the break even price at which budgets are balanced. The second is the actual cost of production of each new barrel of oil. This is very confusing for all people and is deliberately put in the media to confuse everyone. 

The highest price is in the Arctic due to the extremely cold temperatures but the production is quite low. US shale oil which is the new production in last few years is around USD 70-77 while Middle East onshore including Saudi is just USD 10-17 for each new barrel of oil.

 Just this price comparison between US and Saudi shows how much pain can Saudi bear and how much pain can US bear. US shale oil companies cannot bear the pain below USD 70 for much long for 2 reasons: 1) because their cost of production/total oil production is quite high along with lot of bank debt and 2) because they are privately owned and have no cash reserves/cushion and the banks will start calling back their loans.

 Due to high price of oil production for each barrel, US shale oil will suffer the most and hence is the main reason why prices have been brought down.

Of course, if US and Saudi were still 'good friends' then this decline would not have happened because the impact is the greatest on US companies.

 FACTBOX-Oil prices below most OPEC producers' budget needs

We can see prices of some shale oil stocks which are down about 85%-90% from their peak price less than 5 months ago.  

EXXI (88% down), GDP (83% down), AMZG (93% down) and EOX (84% down) are just 4 examples.


 Anyone who is worried about Russia should just read this:

 Rosneft Repays $7 Billion and Sees No Need to Buy Dollars

Russia is doing just fine. Their wells are not privately owned. Their banks are doing ok. There have been no massive job cuts yet. China is supporting them. 


 The price of oil in my view will remain low. It will also go to a range of USD 30-40 within the next 6 months latest (after the poor results of the first and second quarter 2015 of all corporates are released and capital spending drops significantly by June 2015). Thereafter, over the next 1-2 years, price will remain between USD 60-70 at most.

The main reason for the above is that Saudi wants US oil production to decline. Until US oil production declines, I believe, the oil prices will remain low. To top everything, demand should be weak because the global economic conditions are quite challenging almost everywhere in the world except China and will now worsen. 

The latest UBS report mentions, USA has gone from being a marginal consumer of oil to being a marginal producer of oil.

This is the sole reason of why we are having this oil price war! Because there can be only one king of the jungle! The other one must be squeezed to death or must leave! Until then.....the (price) 'war' will go on...... 

tarabel's picture



I can agree with much of this other than the personal speculation things.

But the inevitable fact is that fracking has jammed a permanent, not temporary, lid on oil prices-- and that lid is now fixed way below the needs of the various petro-kleptocracies. Plus improving oil recovery technologies will keep that lid moving lower and lower and lower. 

Major global instability is the obvious outcome of this revolution in technology.

Your guess is as good as mine's picture
Your guess is as good as mine (not verified) Escrava Isaura Dec 27, 2014 12:38 AM

Careful now, don't let your brains go to your head!

Dubaibanker's picture

BRICS cannot be bankrupted, though all of them will have dissimilar problems.

India is an importer of oil, Russia and China are doing just fine along with their friends in Syria, Venezuela, Iran, Iraq, Nigeria, Kuwait, Kazakhstan, Angola, Qatar etc who are now collaborating together against their common enemy i.e. USA.

Venezuela MAY default but has not done so far, party because China has given them cash.

What most people miss out on and is certainly not mentioned in the media is that there is ZERO impact on Russia due to oil price decline looking from a Rouble point of view. Oil has declined 50% and their currency has depreciated 50% so in Rouble terms, they still receive the SAME amount of Roubles as they did last year for selling the same amount of oil (incidentally, their budgets are in Roubles not in USD). Additionally, China has given Russians USD 25bn just in ADVANCE for their oil pipeline.

China imports less than 10% of their oil and gas from Russia, this percentage is set to increase dramatically in the next year and two. with all the money being spent to these pipelines, there will be a GDP boost, tax revenue boost and employment boost in both Russia and China. What is there not to like about it in a positive manner.

South Africa has various reasons like India why it is a disaster and their currency decline from 6.00 to 1 USD to approx 12 to 1 USD is telling us. Crime, low commodity prices, Govt instability, lack of electricity in CBD are all playing havoc with their economy.

India is a disaster waiting to happen, the new Govt just delayed the inevitable by about 6-9 months. Let us hope for better days in India though it is very much doubted looking at their weak banks, weak currency and weak GDP and high inflation along with tax claims (due to changing the tax law and making it retrospective to 1962) on 17 foreign companies.

The less said about China the better, because they are the ultimate beneficiary of everything, low oil prices, buying US and EU real estate and companies for pennies, having highest reserves among any country, yuan becoming more widely used worldwide as compared to just 5 years ago when it was close to zero etc.

Brazil has issues of weak currency but overall is ok and just like India will have a tiny benefit of low oil prices but let us hope that the negative effects (weak exports, banking crisis, corruption, high inflation, very high interest rates, growing unemployment etc) do not outweigh the positives!

The catastrophe of shale will be unable to be handled just 'with a TARP' program. It will impact banks, reduce tax revenues from both the banks and oil companies, create more debt for US Govt touching USD 20 trillion.....China has been selling US treasuries since last year and is now USD 110bn less in last 1 year and US can keep running its Ponzi of selling US treasury debt to US Federal Reserve and let everything implode....the world will be watching it from afar (being insulated from the implosion)!

And...if US can bring in a TARP...what stops Russia or Saudi from doing the same? TARP is a 'socialism for the rich and capitalism for the poor' tool and only applies to Amrika! It is just another form of corruption/crony capitalism but it always fails as we have seen how all major banks have failed in the US despite TARP etc and are struggling on a global stage and unable to help ANYONE including themselves and keep firing and selling their parts (Merill Intl sold to Julius Baer while Shittybank Japan sold to Sumitomo and Shittybank Spain sold to Banco Popular etc)

Russian and Saudi oil wells are all Govt owned anyways....

wrs1's picture

$25/bbl tarriff on oil imported from the Eastern hemisphere will solve all those problems, any oil below $50 will get taxed an additional $2/bbl for every $ under 50.  The dumping of Saudi oil below market price is the problem here, pure and simple.

Neo's picture

The dumping of Saudi oil below market price is the problem here, pure and simple.


Of course you cheered when the price of oil was ABOVE the "market price" for the past 5 years.

It's time to understand that there is no real "market", it's all manipulated.

The "market price" is set by the buyer and seller...and all those Chase/Goldman/Citi fuckers inbetween.

I've seen the Texas oil boom up close, it's always struck me as temporary.

wrs1's picture

Life is temporary.  

Dubaibanker's picture

wrs1, You ask for tarrifs, but they are not possible due to WTO rules on game of fair play.

US already does dumping of chickens and steel worldwide which Russia just banned a few months ago on chickens and Korea toughened with US on steel.

US cannot just put tarriffs because then retaliatory tarrifs will be placed on other products that US exports like we saw with Snowden when China and Germany banned purchase of all hardware from US tech companies. That fall out is still being played out.

Tarrifs are passe because US championed the rules of the WTO and has to abide by the same rules else random sectors will pay a heavy price of tarriff wars.

Imagine, tarrifs on Apple or Starbucks or Caterpillar or US drugs while you speak of inward tarrifs on US oil imports. US companies have already lost a lotof market share globally due to rise of othe rnaitons in the last 2 decades, if US puts oil tarrifs, it will further accelerate the decline of US.

Since US is striving to become a net energy exporter, it cannot afford to place tarriffs on any energy import.

Saudi can do what they like just like US can do what they like. If someone wishes to sell below cost, you cannot stop them. They have an agenda for doing so. They can sustain the losses for longer than the private enterprise in US/UK/EU can. This is why you have not heard anything from US Govt because they have no control over anything.

wrs1's picture

THe US already faces tariffs overseas, don't kid yourself.   No one other than Saudi Arabia would be hurt by this tarriff.  It wouldn't apply to anyone selling above the floor either.  I mean how stupid do you have to be?  Sell your oil for at least $75 or face a tarriff.  Seems stupid to me not to raise the price of your import.  This is a special tariff against under market oil.  Dollar for dollar under $75 and $2 per dollar under $50.  

Dubaibanker's picture

Again, your information in inaccurate and you go on the side of logic. Logic does not work in such critical geo political situations else we would have never had even 1 war in the history of the world. Humans are greedy, self destructive species unllike any wild animal and we will kill each other for lesser things.

As I have mentioned in my long thesis, that US is not buying as much oil from Saudi/OPEC as in the past. So Saudis are already doomed and their friendship with America is coming to an end. With oil exports between OPEC and US at multi decade lows, Saudi does not lose anything in bringing oil price down because this will help them find new buyers of their oil.

Secondly, you have missed, but am sure you know very well that to extract each barrel of oil, the cost is the highest in US/Arctic and lowest for onshore oil in Saudi, UAE, Kuwait etc. Hence OPEC members can sell oil at lowest price of even USD 20 for months before having any form of troubles. In addition, they have cash cushion which private investors, such as yourselves, do not have and to top it all, all oil well sin Russia, Saudi, UAE, Kuwait, Qatar are Govt owned.

If US places tariffs it will only accelerate its own demise because whatever oil they are still buying under contracts with OPEC members will not get renewed and Americans will need to find new friends which is very hard to find if you are an unreliable or a very dominating partner. For better or worse, Saudi/OPEC have a very long history going back several decades as a stable supplier which US does not. Which is the reason why oil was priced in dollars and an agreement signed between Saudis/OPEC and US for defence from Israel and military supplies.

Please see the lowest supplies of oil in over 2 decades in this chart, please click graph on middle right top in small caps and see the chart of Saudi and OPEC.

tarabel's picture



Man, and I thought our bankers were....

Farqued Up's picture

Can I then buy more Au at < $100 per oz!?

My vote is that this bunch of fucktard degenerates are not omnipotent, thus faced with self destruction, will blow up a lot of shit everywhere. There aren't enough caves to save them all, especially the lavish caves built using lemming tax money.

All us grunts better suck it up and stash some groceries and iodine tablets. Look at the $ chart and how it launched away from the 200 day moving avg. Why? Krugman is a genius? Ouija Board tech shit? Our bottom feeder bankers are all-knowing? Or, just maybe the in crowd knows the Shinola is zooming toward the whirling blades with max velocity?

I dunno.

Chad_the_short_seller's picture
Chad_the_short_seller (not verified) sun tzu Dec 27, 2014 1:05 AM

That would be fucking AWESOME!!!!!!! Please bring that so I can make $10 FUCKING MILLION DOLLARS shorting the shale stocks to zero. Then I'd gladly donate $500,000 to saudis for finally giving me something to trade in these rigged markets.

tarabel's picture



Insolent infidel dog!

50 cents a gallon. Take that, you offspring of a camel and a filipino maid.

in4mayshun's picture

Read an interesting theory the other day that proposed that thee Saudi's have no choice but to continue pumping because they have pressurized the wells with water to force up more oil. If they stop pumping the wells, the pressure of the water will force the oil and water to mix and will essentially spoil the oil.
Not sure if it's true or not but seems like a plausible scenario

EatYourCornTakeyourPill's picture

Theory is bullshit as oil and water don't mix.

silvermail's picture

You are mistaken. Yes, oil is not soluble in water. However, water is mixed with the oil. Mixture of water and oil called emulsion.