The Hidden Agenda Behind Saudi Arabia’s Market Share Strategy

Tyler Durden's picture

Submitted by Dalan McEndree via OilPrice.com,

Do the Saudis have an oil market strategy beyond pumping crude to defend their market share? Are they indifferent to which countries’ oil industries survive? Or, alternatively, are they targeting specific global competitors and specific national markets? Did they start with a particular strategy in November 2014 when Saudi Petroleum and Mineral Resources Minister Ali al-Naimi announced the new market share policy at the OPEC meeting in Vienna and are they sticking with it, or has their strategy evolved with the evolution of the global markets since?

And, of course, what does the Saudi strategy beyond pumping crude portend for the Saudi approach to some OPEC members’ calls for coordinated production cuts within OPEC and with Russia?

Conventional Wisdom

Conventional wisdom has it that the Saudis are focused primarily on crushing the U.S. shale industry. In this view, the Saudis blame the U.S. for the supply-demand imbalance that began to make itself felt in 2014. U.S. production data seems to support this. Between 2009 and 2014, U.S. crude and NGLs output increased nearly 4 million barrels per day, while Saudi Arabia’s increased only 1.64 million barrels per day, Canada’s 1.06 million, Iraq’s 0.9 million, and Russia’s 0.7 million (Saudi data doesn’t include NGLs).

In addition, the Saudis, among many others, believed that U.S. shale would be the most vulnerable to Saudi strategy, given relatively high production costs compared to Saudi production costs and shale’s rapid decline rates and the need therefore repeatedly to reinvest in new wells to maintain output.

Yet, if the Saudis were focused on the U.S., their efforts have been unsuccessful, at least in 2015. As the table below shows, U.S. output growth in 2015 outstripped Saudi output growth and the growth of output from other major producers in absolute terms. In addition, many observers also came to believe that U.S. shale production will recover more quickly than production in traditional plays once markets balance due to its unique accelerated production cycle and that this quick recovery will limit price increases when markets balance.

Is the U.S. Really the Primary Target?

The above considerations imply the Saudis—if indeed they primarily were targeting U.S. shale—embarked on a self-defeating campaign in November 2014 that could at best deliver a Pyrrhic victory and permanent revenues losses in the US$ hundred billions.

Is the U.S. the primary target? U.S. import data (from the EIA) suggests the U.S. is not now the Saudis’ primary target, if it ever was. Like other producers, the Saudis operate within a set of constraints. Domestic capacity is one. In its 2015 Medium Term Market Report (Oil), the IEA put Saudi Arabia’s sustainable crude output capacity at 12.34 million barrels per day in 2015 and at 12.42 million in 2016. Export capacity—output minus domestic demand—is another.

Rather than maintaining crude output at 2014’s level in 2015, the Saudis steadily increased it after al-Naimi’s announcement in Vienna as they brought idle capacity on line (data from the IEA monthly Oil Market Report):

This allowed them to increase average daily crude exports by 460,000 barrels in 2015 over 2014 average export levels—even as Saudi domestic demand increased—and exports peaked in 4Q 2015 at 7.01 million barrels per day (assuming the Saudis keep output at average 2H 2015 levels in 2016, and domestic demand increased 400,000 barrels per day, as the IEA forecasts, the Saudis could export nearly 7 million barrels per day on average in 2016):

The Saudis did not ship any of their incremental crude exports to the U.S.—in other words, they did not increase volumes exported to the U.S., did not directly seek to constrain U.S. output, and did not seek to increase U.S. market share. Based on EIA data, Saudi imports into the U.S. declined from 1.191 million barrels per day in 2014 to 1.045 million in 2015—and have steadily declined since peaking in 2012 at 1,396 million barrels per day. (OPEC’s shipments also declined from 2014 to 2015, from 3.05 million barrels per day to 2.64 million, continuing the downward trend that started in 2010). Canada, however, which has sent increasing volumes to the U.S. since 2009, increased exports to the U.S. 306,000 barrels per day in 2015:

Also, the Saudi share of U.S. crude imports declined 1.9 percentage points in 2015 from 2014, and has declined 2.6 percentage points since peaking at 16.9 percent in 2013; during the same two periods, Canada’s share increased 4.5 and 9.9 percentage points respectively (and has more than doubled since 2009):

Other Markets

The Saudis presumably exported the incremental 606,000 barrels per day (460,000 from net increased export capacity plus 146,000 diverted from the U.S.) to their focus markets. Since other countries’ import data generally is less current, complete, and available than U.S. data, where these barrels ended up must be found indirectly, at least partially.

In its 2015 Medium Term Market Report (Oil), the IEA projected that the bulk of growth from 2015 to 2020 will come in China, Other Asia, the Middle East, and Africa, while demand will remain more or less stagnant in OECD U.S. and OECD Europe:

The Saudis find themselves in a difficult battle for market share in China, the world’s second largest import market and the country in which the IEA expects absolute import volume will increase the most through 2020—1.5 million barrels per day (it projects Other Asia demand to increase 2.0 million). The Saudis are China’s leading crude supplier. However, their position is under sustained attack from their major—and minor—global export competitors. For example, through the first eleven months of 2015, imports from Saudi Arabia increased only 2.1 percent to 46.08 million metric tons, while imports from Russia increased 28 percent to 37.62 million, Oman 9.1 percent to 28.94 million, Iraq 10.3 percent to 28.82 million, Venezuela 20.7 percent to 14.77 million, Kuwait 42.6 percent to 12.68 million, and Brazil 102.1 percent to 12.07 million.

As a result of the competition, the Saudi share of China’s imports has dropped from ~20 percent since 2012 to ~15 percent in 2015, even as Chinese demand increased 16.7 percent, or 1.6 million barrels per day, from 9.6 million in 2012 to 11.2 million in 2015. Moreover, the competition for Chinese market share promises to intensify with the lifting of UN sanctions on Iran, which occupied second place in Chinese imports pre-UN sanctions and has expressed determination to regain its prior position (Iran’s exports to China fell 2.1 percent to 24.36 million tons in the first eleven months of 2015).

Moreover, several Saudi competitors enjoy substantial competitive advantages. Russia has two. One is the East Siberia Pacific Ocean pipeline (ESPO) which directly connects Russia to China—important because the Chinese are said to fear the U.S. Navy’s ability to interdict ocean supplies routes. Its capacity currently is 15 million metric tons per year (~300,000 barrels per day) and capacity is expected to double by 2017, when a twin comes on stream. The second is the agreement Rosneft, Russia’s dominant producer, has with China National Petroleum Corporation to ship ~400 million metric tons of crude over twenty-five years, and for which China has already made prepayments. Russia shares a third with other suppliers. Saudis contracts contain destination restrictions and other provisions that constrain their customers’ ability to market the crude, whereas those of some other suppliers do not.

Marketing flexibility will be particularly attractive to the smaller Chinese refineries, which Chinese government has authorized to import 1 million-plus barrels per day.
While they fight for market share in China, the Saudis also have to fight for market share in the established, slow-growing or stagnant IEA-member markets (generally OECD member countries). Saudi exports to these markets declined 310,000 barrels per day between 2012 and 2014, and 490,000 barrels per day between 2012 and 2015’s first three quarters. Only in Asia Oceania did Saudi export volumes through 2015’s first three quarters manage to equal 2012’s export volumes. During the same period, Iraq managed to increase its exports to Europe 340,000 barrels per day (data from IEA monthly Oil Market Report).

It is therefore not surprising that the Saudis moved aggressively in Europe in 4Q 2015—successfully courting traditional Russian customers in Northern Europe and Eastern Europe and drawing complaints from Rosneft.

As with China, the competition will intensify with Iran’s liberation from UN sanctions. For example, Iran has promised to regain its pre-UN sanctions European market share—which implies an increase in exports into the stagnant European market of 970,000 barrels per day (2011’s 1.33 million barrels per day minus 2015’s 360,000 barrels per day).

Might the U.S. be an Ally?

Without unlimited crude export resources, the Saudis have had to choose in which global markets to conduct their market share war, and therefore, implicitly, against which competitors to direct their crude exports.

Why did the Saudis ignore the U.S. market?

First, U.S. crude does not represent a threat to the Saudis’ other crude export markets. Until late 2015, when the U.S. Congress passed, and President Obama signed, legislation lifting the prohibition, U.S. producers, with limited exceptions, could not export crude. Even with the prohibition lifted, it is unlikely the U.S. will become a significant competitor, given that the U.S. is a net crude importer. Therefore, directing crude to the U.S. would not improve the Saudi competitive position elsewhere.

 

Second, the U.S. oil industry is one of the least vulnerable (if not the least vulnerable) to Saudi pressure—and therefore least likely and less quickly to crack. Low production costs are a competitive advantage, but are not the only one and perhaps not the most important one. Financing, technology, equipment, and skilled manpower availability is important, as are political stability, physical security, a robust legal framework for extracting crude, attractive economics, and access and ease of access to markets. The Saudis major export competitors—Russia, Iran, and Iraq—are far weaker than the U.S. on all these areas, as are its minor export competitors, including those within—Nigeria, Libya, Venezuela, and Angola—and outside OPEC—Brazil.

 

Third, in the U.S. market, the Saudis face tough, well-managed domestic competitors, and a foreign competitor, Canada, that enjoys multiple advantages including proximity, pipeline transport, and trade agreements, the Saudis do not enjoy.

 

Finally, the Saudis may be focused on gaining a sustainable long term advantage in a different market than the global crude export market—the higher value added and therefore more valuable petroleum product market. Saudi Aramco has set a target to double its global (domestic and international) refining capacity to 10 million barrels per day by 2025. Depressed revenues from crude will squeeze what governments have to spend on their oil industries and, presumably, they will have to prioritize maintaining crude output over investments in refining.

In this Saudi effort, the U.S. could be an ally. The U.S. became a net petroleum product exporter in 2012 (minus numbers in the table below indicate net exports), and net exports grew steadily through 2015. Growth continued in January, with net product exports averaging 1.802 million barrels per day, and, in the week ending February 5, 2.046 million. U.S. exports will lessen the financial attractiveness of investment in domestic refining capacity, both for governments and for foreign investors in their countries’ oil industries (data from EIA).

Saudi Intentions

The view that the Saudi market share strategy is focused on crushing the U.S. shale industry has led market observers obsessively to await the EIA’s weekly Wednesday petroleum status report and Baker-Hughes weekly Friday U.S. rig count—and to react with dismay as U.S. rig count has dropped, but production remained resilient.

In fact, they might be better served welcoming resilient U.S. production. It may be that the Saudis will not change course until Russian output declines, Iraq’s stagnates, Iran’s output growth is stunted—and that receding output from weaker countries within and outside OPEC would not be enough. If this is case, the Saudis will see resilient U.S. production as increasing pressure on their competitors and bringing forward the day when they can contemplate moderating their output.

NOTE: Nothing in the foregoing analysis should be understood as denying that the U.S. oil industry has suffered intensely or asserting that this strategy, if it is Saudi strategy, will succeed.

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The Spanish Ambassador's picture

Friday nite cruzing the strip, smoking doobies picking up cheerleaders.  Now  friday nite is reading about the freaking Saudis.

I hate those guys.

Escrava Isaura's picture

 

 

Article MAIN Point: Conventional Wisdom

Conventional wisdom has it that the Saudis are focused primarily on crushing the U.S. shale industry.

Article LAST words: NOTE: Nothing in the foregoing analysis should be understood as denying that …. IF IT IS Saudi strategy. 

 

Does anyone with their head screwed on believe this Conventional Wisdom nonsense?

 

Let me give you three examples:

Isn’t Saudi Arabia going into war? Where will the money come from? In a war, Saudi Arabia will go broke before US shale.

Second: Saudi Arabia Per Capita Income:

Despite possessing the largest petroleum reserves in the world, per capita income dropped from approximately $18,000 at the height of the oil boom (1981) to $7,000 in 2001, according to one estimate. As of 2013, per capita income in Saudi was "a fraction of that of smaller Persian Gulf neighbors", even less than petroleum-poor Bahrain.

https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia#Challenges

Third: Saudi Arabia has no more oil fields to tap in:

http://peakoilbarrel.com/closer-look-saudi-arabia/

 

And I could go on………………

 

philipat's picture

If the Saudis really want to increase share of the China supply, the simple answer is to allow China to pay (As does Russia) in CNY? But that, of course, would then support the "conventional wisdom" theme by putting more pressure on the Petrodollar......

Fractal Parasite's picture

It's really not that complicated.

Michael Reagan, eldest son of Ronald Reagan, in March 2014:
http://townhall.com/columnists/michaelreagan/2014/03/06/putin-petroleum-...
“I suggest that President Obama might want to study how Ronald Reagan defeated the Soviet Union. He did it without firing a shot, as we know, but he had a super weapon - oil. Oil was the only thing the Soviets had in the 1980s that anyone in the rest of the world wanted to buy, besides ICBMs and H-bombs, and they weren't for sale.  Since selling oil was the source of the Kremlin's wealth, my father got the Saudis to flood the market with cheap oil. Lower oil prices devalued the ruble, causing the USSR to go bankrupt, which led to perestroika and Mikhail Gorbachev and the collapse of the Soviet Empire.”

ebear's picture

I"m sure trying to maintain military parity with NATO, plus a war in Afghanistan, not to mention poor central planning from the get go had nothing to do with it.

Fractal Parasite's picture

There were multiple attack vectors against the USSR, including:

  • Costly arms race (as you pointed out);
  • US/Saudi attack against USSR troops (confirmed here by Sec of State Clinton), after they were invited in by the Afghan government (called an "invasion" by Western powers);
  • Crashing the oil price (confirmed by Michael Reagan);
  • Inflitration of traitors into the state apparatus (what do you think the CIA was engaged in for 50 years);
  • Artificial shortages in the stores - trainloads of goods were held up or dumped to engineer dissatisfaction of the masses (images here);
  • .. and so on.

And, for sure, some incompetence, which allowed those various attacks to succeed.

Today the attack vectors against Russia include:

  • Attacks against partner nations (Ukraine, Armenia, Syria, China, Brazil, ..) to dismantle alliances;
  • Crashing the oil price (Saudi over-production);
  • Currency manipulation to crash the ruble, creating dissatisfaction of the masses;
  • Funding "independent" (i.e. hostile) media in Russia (Senate Bill 2277);
  • Organising street protests and attempts at "Color Revolution";
  • Hysteria and demonization in the Western mass-media;
  • Sanctions, forcing Russian businesses to liquidate assets and sack workers in order to immediately repay EUR/USD loans;
  • A foreign-controlled central bank which doesn't lend in RUB, thus strangling the economy (and people);
  • ... and so on.

Same script, new phase. The driving strategy behind all this is explained in Zbigniew Brzezisnski's 1997 book "The Grand Chessboard".

philipat's picture

Not sure if I agree with that. Why would the Saudis inflict so much pain on themselves simply to serve their US masters against Russia? Russian oil is NOT going away but US shale oil IS going away.

Cognitive Dissonance's picture

I, for one, welcome my alien Saudi masters.

besnook's picture

as it turns out, in my own hindsight, the sauds cranked up the pumps to preempt the persian pumps. the chinese made nicey, nicey with all of them. the sauds will blow off steam while being "held back" by the west over the syria issue and things settle down because everyone got their money.

Stuck on Zero's picture

The Saudis also recognize that their oil is competing against cheap natural gas. We are now building LNG powered locomotives and LNG powered ships. Whole fleets of cars are moving to CNG.

http://www.getransportation.com/locomotives/locomotives/nextfuel

 

johngaltfla's picture

The Saudis have a bigger problem; they don't even control their Southern border. They are losing tanks, men, and other equipment daily to a bunch of sandal clad Houthi warriors while they have the "best" equipment from the United States:

GRAPHIC Video Shows Saudi Observation Post Wiped out INSIDE Saudi Arabia’s Najran Province
Bastiat's picture

The Iranians pray the Saudis will join the fight on the ground in Syria--me too.

johngaltfla's picture

The Saudi forces allegedly deployed are designed for operations to protect the royals. Saudi SF are not trained for foreign engagements, have no familiariaty with Syrian, Iranian, or other combat operations. It would be like sending our TSA to fight the Mexican Drug cartels in Monterray.

IF the Saudi and GCC SF's engage in combat inside of Syria without US oversight, they will lose 50% of their forces in the first engagement with Syrian or Hezbollah forces who now have learned how to launch coordinated air and ground assaults on enemy positions.

PleasedToMeatYou's picture

"It would be like sending our TSA to fight the Mexican Drug cartels in Monterray."

Now THAT'S a good idea! 

dogismycopilot's picture

HOLY FUCK! Did I just see a bunch of Houthis WITH NO FUCKING SHOES just overrun a Saudi bunker manned by a bunch of Saudis in some gucci tactical outfits armed with their KSA provided HK 36s https://en.wikipedia.org/wiki/Heckler_%26_Koch_G36 and a browning 30 cal?

That was an insane video.

johngaltfla's picture

You did. No guards posted. Nothing. The Saudi millitary is a joke.

theblackknight's picture

Putin put a fat cock in Obamas mouth with his peace calling in Syria. The numbers dont mean shit on a long enough timeline, and we are not on that.

UNCOMPROMISED's picture

WGAS about crude oil already.

are we there yet's picture

Remember the false peak oil fears? It was all made up.

MD's picture

We will hit peak oil production at some point in time - oil is a finite resource, after all.  The question is when.  It will be obvious only in hindsight.

Chuckster's picture

I lived thru 50 years of "peak oil" and believed it like everyone else.  Now we are going to have "peak negative interest rates"  "peak bankruptcies"  "peak bullshit"

When electricity cost went up in Mn. I had a neighbor that had his yard full of night lights.  He said he couldn't turn them off because the power company(NSP) had run ads on TV for 50 years saying electricity was penny cheap.  He said he was too brainwashed to turn them off.

George W. gave us "surge".  It gets used on a daily basis now.  I hate it!  If someone has the shits....are they surging?

Escrava Isaura's picture

 

 

are we there yet Remember the false peak oil fears? It was all made up.

 

CONVENTIONAL/CRUDE oil in the US PEAKED in 1971.

CONVENTIONAL/CRUDE oil  worldwide PEAKED in 2005.

 

Second, unconventional oil, such as shale; other liquids, such as ethanol, palm oil; and gas and its coproducts such as butane, ethane, propane, and pentanes ARE NOT oil. Their energy content per unit of volume is significantly lower than crude oil.

giggler321's picture

It's all pre-zero point energy anyway - gotta sell the last drop before making the move....

Chuckster's picture

An interesting opinion.  Maybe producing more product than the world can consume by zero interest money and over production has finally caught up with the world.  Japan did this and 25+years later still can not get their economy out of the doldrums.  One would think the rest of the world would have been watching and learning.  Farmers applied excessive  fertilizer for 50 years not knowing they were doing it at the time and ruined vast water sheds in the mid-west (we laugh about the Russians doing it in Kazakhstan).  They had no way of knowing that they were applying too much during those years.  The premise was that if some is good more must be better.  I think China and others made the same mistake in producing goods.  The free credit has been gas on the fire.

I don't think Saudi Arabia wants to lose the revenue they are losing (what sane person would?)  I think we are going to go thru a period of adjustment where world production drops to meet world demand on most goods.  As always this could get out of hand with bankruptcies etc. The concept of negative interest rates is going to be found to be the exact wrong thing at the wrong time.  The next time around they will know better if they are still around. 

WW2 brought us out of the first 1930s depression.  We may have WW3 to bring us out of this one.

The Great Reset.

SillySalesmanQuestion's picture

The Saudi's remain committed to "helping" the US squeeze Russia at the expense of our own shale industry, Canadian tar sands and bankrupting Venezuela and Brazil. When prices get low enough, the Four Horseman of the Big Oil (Exxon, BP, Dutch Shell and ARAMCO) will swoop in and buy it up, for a fraction of what it is worth.
It's just another power play to squeeze the smaller producers out of the market. When they are finished, oil will go back up and they will make gazillions more. It's been used over and over again for a hundred plus years.
Big fish eat small fish...same as it ever was.

Escrava Isaura's picture

 

 

Exactly, because these small fishes are too stupid; even that "these" small fishes are the same size fishes, go figure.

 

“The stupidity of the average man will permit the oligarch, whether economic or political, to hide his real purposes from the scrutiny of his fellows and to withdraw his activities from effective control. Since it is impossible to count on enough moral goodwill among those who possess irresponsible power to sacrifice it for the good of the whole, it must be destroyed by coercive methods and these will always run the peril of introducing new forms of injustice in place of those abolished.” — Reinhold Niebuhr

 

johnnycanuck's picture

By God Watson, I think you're on to something there!

Emergency Ward's picture

I'm glad to live in a country where politicians and media can't be bought off by filthy Saudi oil lucre.

SweetDoug's picture

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Solar panel prices are dropping like rocks, and grid parity will be reached in as little as 2 years.

And then prices will start to go up.

No… No… Actually, they'll continue to drop and in 10 years, they'll be dirt cheap.

They're talking about 'solar panel cell paint'.

Musk's battery system is only going to get cheaper with the gigfactory.

I'm stoked.

The energy companies are crapping their Depends®.

Why am I paying ?$100 mnth for Hydro at my cottage, when I use about $4 ƒµç?¡?? bucks and the rest is ßµ££$?φ charges?! Transmission costs, debt retirement?

It's gonna be like the Blockbuster video stores…

chistletoe's picture

The target is the USA and the petrodollar.

 

NOT the shale drillers, but the banks.

 

AND .... it is working!!!!!

Pazuzu's picture

If so then who called the hit?

falak pema's picture

what a question : Allah !

Or his rep in Saudi, the wahhabi king.

Amazing how Iran's hatred for 'the satanic empire' is now completed by that of Saud who cannot stand the Heretic Shia challenging the Wahhabis for leadership of Islam with the blessing (or so it seems in Riyadh) of Potus.

Betrayed by friend to dire foe is a double whammy of your intimate soul. Can you imagine how the Saud feels? They are true medieval feudals in mind.

What is worse than the Infidel is the heretic; always has been the nightmare of all despots : the enemy within, the traitor to the family !--"It was BArzini all the time."

Two headed Islam, now like two headed Christianity of Crusader/Ottoman Empire days, heads for its inevitable and painful Renaissance; if the US does not blow up in the meantime the world in order to checkmate Putin/China.

Every Empire has its own traitor/Nemesis !

And China factory owned by US consumer/Oligarch--why else would they have offshored-- and Russia remorphing into Soviet style warrior --have that joint profile in the eyes of Masters of Universe.

Being an Emperor has that permanent defect; which is not the case of a modest man or nation.

Modesty is what the reset is about for Pax Americana and its surrogates  in more ways that one, unless they decide its Armageddon now or never !

For surrogate Saud its just collateral damage, like in Iraq in past, due to Imperial reset. They are the designated fall guys.

The Brits made them Kings of Arabia ; the US made them lords of oil; the US can now strip them naked and/or fall in doing so.

But in the meantime we regress in West to medieval mindsets!

What a can of worms the world has become.

But thats History repeating !

Faeriedust's picture

The Sauds are dealing with a domestic budget crisis created by the new king (and most especially his Defense Minister son)'s attempts to impose regional hegemony in the Middle East.  They are attempting to move from the "soft power" of deep pockets to "hard power" of direct control over formerly independent regions, in order to provide colonial positions and the opportunity for advancement to their disaffected poor.  It will not end well, and the complete collapse of the Kingdom is a distinct possibility.  But of course, they're not going to admit that anywhere it might see print.

 

antonina2's picture

HAHAHAHAHAHAHAAAAAAAAAAAAAHHHHHHHHHHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!  OMG so that means that oil is going to be under $10 a barrel at some point in the near future.  Central banks and TBTFs really have to unpeg their broad market algos from oil so they dont drop below the last ressection lows.  Peak oil was fueld by a whole bunch of BS and I think that Saudi Arabia sees that and have decided that there really is not enough room for all the cooks in the kitchen, sorry Nigeria and others you are going to have to find some other source of revenue, because as time goes on demand will come down and more oil will be discovered.  What a frikin shit show and everyone is buying into the whole thing.  Gawd.....the market should be much lower than it is now, but that's a whole different story :)

clue4sum's picture

Wqw,an entire article proclaiming the resilience,strength and down right indestructibility of the domestic US energy companies. Kind of makes you want to run out and buy some stocks. That is right until the disclaimer at the bottom that claims that "this article might be bullshit",not to mention the author tries to whine his way through blaming others for selling their oil to cheap.

The moral here; Elect a King of the Earth ,be buddies with him so you can sell your oil first,and oh yeah fuck markets.

 

OZZIDOWNUNDER's picture

Its ALL BS !  The way Oil prices dropped initially points the finger directly at the USA who used their criminal manipulated share market to do the job. Russia was always the target & for a lot of reasons including giving shelter to whisleblower  hero Edward Snowdon.

The US Govt & The British Govt are choking with desperation at the obvious ability of Russia to combat via RTV the BS & lies spread by those M Fuckers. Thank Dog for the I/Net !

Go Vlad !

johnnycanuck's picture

That was a hell of a long read just to get another opinion. 

 

Here's my opinion, what the Saudi's are doing is based on geopolitics more so than market share. The extraordinary loss they are absorbing for this  so called market share battle simply doesn't make sense and the more they bear down on their geopolitical adversaries, the more they run the risk of being relegated to the dustbin of history.  Which in my opinion, can't come fast enough.

 

They owe their position in the world to Western governments and some of the most powerful western corporations that exist in modern times and they will do as they are told. And that is where the geopolitics takes the lead over their so called market share issues. 

 

No need to thank me for not boring you with a vast number of charts, suppositions etc.  in order to cut to the chase.

lester1's picture

No worries. The Fed will simply back up the wall street banks who fund the shale oil companies debt. This can go on for years and years.

 

The Fed can print dollars , Saudi Arabia can't !

Harbourcity's picture

This article was totally pointless.

Wild E Coyote's picture

Geopolitics, market share targeting, blah blah. 

And here I am thinking that Saudi selling oil cheap because it can't find enough people to buy at higher price.

All this started soon after Russian oil export deal with China which according to Russian insider was at a very low but realistic price, considering Iran was soon to follow in big time. 

And Saudi started pumping more, only to maintain cashflow. They needed the revenue.

Last I heard Saudi is not paying even some major contractors.  

 

damicol's picture

Fuckung bullshit.

It started earlier, probably fanout the 3 4 qr 2013 when global demand stated to limp.
How do I know this, Because shipments of coal and iron ore and all the other building commodities started to fall.
Ore cement copper and every other thing was already waaaaay down when oil started to slide.in 2014.
The only miracle is that it held so high for so much longer than other commodities.

Why the fuck is it no one can see recession coming when it is so fucking obvious and has been for two years.

Does every moron have such a deluded rosy outlook that they see recessions and demand crashes AFTER the event

Sorry_about_Dresden's picture

With AI algos in charge one wrong, misspelled word, could send this market into the depths of oblivion and chaos.

The margins are so thin no one wants to miss out so they stay locked, and loaded, at all times waiting for their black swan event so they can retire.

What does this do to the MIC who are so dependent on Saudi bux, from oil sales, to pay for mercs and ammo?

The Feral Reserve is dependent on a certain level of oil revenue to keep churning UST debt. This must be causing serious liquidity problems for the moneychangers?

This has to be putting a serious dent on the amount of UST issue, then on the Primary Dealer fees and on down the line. The equity market, with few exception, is perfectly correlated and directly proportional to the price of a barrel of oil.

The whole PONZI is now relying on the support level over $30/barrel? If it dips below $25/barrel we get surges of volatility? Now the complex is up against full storage, and every Supermax filled to capacity? Where will they put the next drop? Refiners are getting crushed by razor thin margins yet they still pump, wide open? They have to find another scheme to create UST debt to keep the dollars flowing back to the mother ship but, the tit is drying up. No more storage, no more pumping, no more market for debt that must be created. Is the Feral Reserve going to put another $3.5 trillion on their, already bloated, balance sheet? At what point does this become hyperinflationary? It is not until it is? 

Oil prices dropping and UST yields dropping simultaneously is concrete evidence of utter unsustainability. 

Mark Cuban has to actually do some heavy lifting to stay ahead of the freight train but, what about CALPERS? They can't mitigate risk in this environment. There is just not enough dollars to go around when this deflationary train gets going. Better not be there when it rolls over! 

And we must endure this for another year until the next clown takes the WH and goes through tanker trucks full of Febreeze trying to extinguish the stank of the wookie! Maybe the British will do us a solid and come burn the place again. we can make a centennial event every century. 

tarabel's picture

 

 

Saudi Arabia is spitting into the wind. They are betting their lives that 1950s technology is going to beat out 2010 technology.

By the time it gets to 2020 or 2025 technology, they are going to be out of luck, even if nothing else happens in the meantime.

I Write Code's picture

What did this article actually say?

I think someone with a broken Excel spreadsheet convinced the Saudi royals of something really, truly stupid.  Where does that fall on your strategy map?

skipweston's picture

The Saudi's real problem:
the petrodollar agreement was concluded by President Nixon in 1973.
The essence of the deal was that the U.S. would agree to military sales and defense of Saudi Arabia in return for all oil trade being denominated in U.S. dollars. The dollar was moved from a gold standard onto a crude oil standard.
Saudi Arabia wants to get out of the Petrodollar agreement. The US Government will do what ever it takes to preserve the the Petrodollar, like sanctions on Russia & Iran or wars in Libya & Iraq. Back in 1973 the Saudi's like the idea of Petrodollar and their Global Oil Monopoly, but today not so much.

Youri Carma's picture

Just one question: Do you really think that the Saudi's could attack the U.S. without any repercussions as suggested by the MSM? OK there's your answer.