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Here's Which Mid-East Oil Producers Are Going Broke In The Face Of The New "Crude" Reality
A few weeks ago, the IMF said something that, although it should have been obvious, seemed to surprise quite a few people. Here’s the quote from a recently released study:
Bahrain, Oman, and Saudi Arabia have medium-term fiscal gaps of some 15–25 percentage points of non-oil GDP, while conflict-torn Libya has a gap of more than 50 percent of non-oil GDP.
In, contrast, CCA oil exporters have at least 15 years’ worth of available financial savings,1 while GCC countries are split evenly between countries with relatively large buffers (Kuwait, Qatar, and the United Arab Emirates—more than 20 years remaining) and countries with relatively smaller buffers (Bahrain, Oman, and Saudi Arabia—less than five years).
In other words, the Saudis, Oman, and Bahrain are going to go broke in “less than five years” if something doesn’t give in terms of either oil prices, budgeting, or both.
Because this represents nothing short of a seismic shift in the way we think about ME crude exporters, and because it's helpful to know just where producers need prices to go in order to avoiding racking up double-digit budget deficits, we present the following visual from Deutsche Bank which depicts breakeven prices and also summarizes where the various Mid-East producers stand (fiscally speaking) in the wake of crude's remarkable decline:
As you can see, there's a long way to go for the Saudis and the UAE to get back into the black and indeed, even Qatar is now set to post red ink.
We're sure invading Syria would help. After all, things have gone so well in Yemen...
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They should accumulate more debt and extract more. Get with the program!
More like time to officially colonize them, they're taking all our wealth and sending us all their problems.
Hey... it's not like they will shoot down some Russian aircraft in Syria and cause the price to spike or anything...
Why Syria is targetted:
An Israeli company thinks it has found oil—in very tricky territory The Golan Heights are still regarded internationally as illegally-occupied Syrian territory
Nov 4th 2015 | Middle East and Africa
AN OIL rig carrying out exploratory drilling is hardly a rare sight in the Middle East; but this is no ordinary place. Israeli flags fly on it, though no other country in the world recognises Israel’s sovereignty over the area. A few miles to the east, Islamist rebel groups are fighting a bloody war. And few people ever expected that significant amounts of oil might lie there at all, under a dormant volcanic field. Welcome to the Golan Heights.
Israeli and American oilmen believe they have discovered a bonanza in this most inconvenient of sites. After three test-drillings, Yuval Bartov, the chief geologist of Genie Oil & Gas, a subsidiary of American-based Genie Energy, says his company thinks it has found an oil reservoir “with the potential of billions of barrels”.
Veterans of Israel’s energy sector are sceptical. Despite many optimistic starts, only two small oilfields in Israel have ever been commercially exploited. The indications are that the Golan field is of a different magnitude. But since there is little experience anywhere of drilling for oil under once-volcanically-active areas, it will take more comprehensive work to determine whether oil can be extracted profitably. And even then, big obstacles will remain.
This is not Genie’s first foray into Israel. In 2008 it launched an investment to extract shale oil in the Valley of Elah, in central Israel, but was forced to stop operations there in September 2014 when a coalition of environmentalists prevailed on planning authorities to withhold the necessary permits. This time round the company has managed to get exploratory licences, despite opposition from green and local groups concerned that drilling could pollute the largely unspoilt Golan countryside and the lake below, the Sea of Galilee, which is the source of most of Israel’s drinking water. But many more legal and planning battles await. Genie will also need to team up with a more experienced oil company when and if it moves to full-scale extraction.
The biggest problems, though, revolve around the issue of sovereignty. Israel’s decision in 1981 to annex the Golan (unlike the West Bank, which remains formally under military occupation) caused a diplomatic crisis with the United States. The Heights are still regarded internationally as illegally-occupied Syrian territory. Israel’s leaders in the past have offered to pull back from the Golan, which it captured in 1967, in return for a comprehensive peace treaty with the Syrian government. But any such deal has been firmly out of the question since Syria began disintegrating in 2011.
An influential group is now lobbying Israel’s government to take advantage of the chaos in Syria and demand international recognition of its control of 1,200 square kilometres (460 square miles) on the Golan. The group includes Zvi Hauser, a former cabinet secretary to the prime minister, Binyamin Netanyahu, who has urged both in private and in the media that Israel should demand this as a compensation for having to tolerate the nuclear agreement with Iran.
It is not clear whether Genie shares this objective, but if it chose to, it would be no surprise. Genie’s founder and CEO is Howard Jonas, an influential American-Jewish businessman. The president of Genie’s Israeli subsidiary is Effie Eitam, a Golan settler and a former general who is close to the prime minister. And in America Genie has increased its clout. In September it added some influential new members to an advisory board that already included a former vice-president, Dick Cheney, and the media tycoon, Rupert Murdoch. One was Larry Summers, who was treasury secretary in the Clinton administration and director of the National Economic Council under Barack Obama. Also added were two other Clinton-era appointees: Bill Richardson, an ex-ambassador to the United Nations and energy secretary, and James Woolsey, a former CIA director.
For most of its existence, Israel has relied on unstable or distant sources for its energy. Recent finds of large offshore natural gasfields have opened new opportunities, but have also caused big fights over pricing, export quotas and private ownership. This week Israel’s economics minister, Aryeh Deri, resigned in a row over these issues. So the prospect of energy independence for his country—as well as the chance to establish recognition of its control of land captured 48 years ago—is certainly alluring.
Nothing good has ever come out of the Golan Heights. But really is this true geologically? Dead volcano geology is an improbable gigantic oil trap. Also this article has way too many emotional trigger words, and trigger names. It sounds like an engineered story.
If Saudi would cut back 10% prices would go up 30% (or some approximation). They are not stupid and know this. Putting shale producers out of business is a joke for an excuse, yes they are going out of business now but will turn it back on overnight when the price is right. Obama/Kerry made a deal to hurt Russia and Iran. Russia screwed up the plan by jumping in. Russia will clean house in a few weeks and tell Saudi your next if you dont cut back production. Saudi will look for Obama/Kerry and they will be cowering in the basement of the WH. Saudi will say yes sir how much sir. A dockman will walk out on the dock and turn the big valve to the right and the glut will be over. Just my opinion, and 30 yrs of ups and down in the oil industry. Call me on it if I am wrong in about 5 months. d
PS all we had to do was put an import tax on oil from overseas, save our industry, be energy independant, and tell all them sand n to kiss our ass. They would have been broke in one year. Way too simple.
If Saudi would cut back 10% prices would go up 30% (or some approximation). They are not stupid and know this. Putting shale producers out of business is a joke for an excuse, yes they are going out of business now but will turn it back on overnight when the price is right. Obama/Kerry made a deal to hurt Russia and Iran. Russia screwed up the plan by jumping in. Russia will clean house in a few weeks and tell Saudi your next if you dont cut back production. Saudi will look for Obama/Kerry and they will be cowering in the basement of the WH. Saudi will say yes sir how much sir. A dockman will walk out on the dock and turn the big valve to the right and the glut will be over. Just my opinion, and 30 yrs of ups and down in the oil industry. Call me on it if I am wrong in about 5 months. d
PS all we had to do was put an import tax on oil from overseas, save our industry, be energy independent, and tell all them sand n to kiss our ass. They would have been broke in one year. Way too simple.
Been a lot of reality facing in the commodity and PM market. When does the financial market face reality?
ISIS isn't listed.
Are they not still stealing Syrian and Iraqi oil and selling it to Turkey and Israel?
http://whatsupic.com/economy-world/1407936162.html
Because they're an American producer.
We who remember the oil embargos of the 1970s have no sympathy; sux to be them.
Whats wrong with red ink? If red ink were a predictor of economic collapse, the US would have collapsed a long time ago. Nothing to see here, move along now.
Makes on ponder that the the Sunni / Shia thing between Saudi Arabia and Iran really wasn't the problem for the Saudis... they just wanted to keep Iranian oil out of the Markets.
So...deficit pumping?
If Saudi would cut back 10% prices would go up 30% (or some approximation). They are not stupid and know this. Putting shale producers out of business is a joke for an excuse, yes they are going out of business now but will turn it back on overnight when the price is right. Obama/Kerry made a deal to hurt Russia and Iran. Russia screwed up the plan by jumping in. Russia will clean house in a few weeks and tell Saudi your next if you dont cut back production. Saudi will look for Obama/Kerry and they will be cowering in the basement of the WH. Saudi will say yes sir how much sir. A dockman will walk out on the dock and turn the big valve to the left and the glut will be over. Just my opinion, and 30 yrs of ups and down in the oil industry. Call me on it if I am wrong in about 5 months. d
PS all we had to do was put an import tax on oil from overseas, save our industry, be energy independent, and tell all them sand n to kiss our ass. They would have been broke in one year. Way too simple.
Putin is now a defacto member of OPEC, expect an OPEC meeting setting new, lower quotas very soon. Oh, by the way, at that meeting they will elect Putin Sargent at Arms in charge of quota enforcement. 40+ years for me.
You keep saying it, it must be true.
An "orchestrated" war or even the threat of war , (not a nuke war) will bring oil-prices back to $100-$120.