Saudi Arabia risks destroying Opec and feeding the Isil monster

'Saudi Arabia is acting directly against the interests of half the cartel and is running Opec over a cliff,' says RBC


The rumblings of revolt against Saudi Arabia and the Opec Gulf states are growing louder as half a trillion dollars goes up in smoke, and each month that goes by fails to bring about the long-awaited killer blow against the US shale industry.
Algeria's former energy minister, Nordine Aït-Laoussine, says the time has come to consider suspending his country's Opec membership if the cartel is unwilling to defend oil prices and merely serves as the tool of a Saudi regime pursuing its own self-interest. "Why remain in an organisation that no longer serves any purpose?" he asked.
Saudi Arabia risks destroying Opec and feeding the Isil monster - Telegraph

The Saudis tell us with a straight face that they are letting the market set prices, a claim that brings a wry smile to energy veterans. One might legitimately suspect that they will revert to cartel practices when they have smashed their rivals, if they succeed in doing so.

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Yes, that is the general idea. Allow the price to drop and have all the money that was invested in shale gas go down the pan.

That way the alternative power industries get a bad reputation and the power revolution is put off for another 25 years.

I see nothing strange in the Saudi plan.

The only threat to OPEC is that more oil has been discovered than you can shake a barrel at. This will result in much lower prices which will serriously dent their income.

MickeyW said:

'Saudi Arabia is acting directly against the interests of half the cartel and is running Opec over a cliff,' says RBC The rumblings of revolt against Saudi Arabia and the Opec Gulf states are growing louder as half a trillion dollars goes up in smoke, and each month that goes by fails to bring about the long-awaited killer blow against the US shale industry. Algeria's former energy minister, Nordine Aït-Laoussine, says the time has come to consider suspending his country's Opec membership if the cartel is unwilling to defend oil prices and merely serves as the tool of a Saudi regime pursuing its own self-interest. "Why remain in an organisation that no longer serves any purpose?" he asked.

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So what is the long awaited blow against shale oil? If OPEC starts to restrict oil production (and ALL the member nations will cheat) to drive prices up shale oil thrives. If OPEC arbitrarily set a high price for oil, shale oil has another boom as the higher costing shale sites in Canada and off shore sites become profitable and non OPEC productions surges up- again. Many of the smaller OPEC nations will sell 'black market' cheaper oil to offset lower consumption.

If the smaller OPEC nations attempt to break away from OPEC and demand higher prices, Saudi Arabia has the spare production capacity to supply consumer nations with cheap oil- that will break the rebel oil nations.

Smaller OPEC nations are learning what our oil producing states should know by now- the invisible hand of the free marketplace could give a damn about stable economies- oil is a boom bust business and any government attempting to use it as a major player in the budget is doomed to face hard times periodically.

MickeyW said:

'Saudi Arabia is acting directly against the interests of half the cartel and is running Opec over a cliff,' says RBC


The rumblings of revolt against Saudi Arabia and the Opec Gulf states are growing louder as half a trillion dollars goes up in smoke, and each month that goes by fails to bring about the long-awaited killer blow against the US shale industry.
Algeria's former energy minister, Nordine Aït-Laoussine, says the time has come to consider suspending his country's Opec membership if the cartel is unwilling to defend oil prices and merely serves as the tool of a Saudi regime pursuing its own self-interest. "Why remain in an organisation that no longer serves any purpose?" he asked.
Saudi Arabia risks destroying Opec and feeding the Isil monster - Telegraph

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This is not really news.

In the oil industry we have seen, for some time now on repeat, pushes between various nations on what the price of oil should be as to sustain break even points on type of oil coming out of the ground (typical oil tar, oil sands, shale oil, etc.) *as well as* protections of market share.

All that Saudi Arabia (and a handful of others) has done is the exact same thing they have done before when their market share fell, the forced a price lowering of oil by flooding the market with supply and as a consequence harmed other nations that need oil to be more expensive just to cover the costs of exploration and extraction of different oil sources.

This is almost cyclic and odds are eventually these nations will see new market equilibrium down the road where oil prices start to go back up. This year is turning out to be a wash, and when looking out over the futures markets well out into 2016 it appears at least the 1st quarter of next year will be the same. However, the party always ends and eventually nations like Russia, the US, Canada, several South America Nations, and elsewhere will see oil prices start to increase.

The "US shale industry" (which by the way is not some separate entity somewhere) has been through this before. Back in the late 80s several large energy corporations walked away from Billions in projects from Colorado up to Alaska when shale oil lost its break even points. We just saw that happen again this past year. But as we all know, eventually prices will go back up supporting the exploration of shale oil that requires remarkably higher break even points for oil prices. As in higher than $100 bbl, or even $120 bbl, in some cases (dependent on difficulty of extracting what is basically a sandy black rock out of the ground by extreme chemical and pressure based forces.)