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Saudi oil minister denies crude price war

Business | Updated today at 03:17 AM
MEXICO CITY (AFP) - Saudi Arabia's oil minister on Wednesday rejected talk that the country was leading a price war in global oil markets as crude prices continue to sink.

"Talk of a price war is a sign of misunderstanding - deliberate or otherwise - and has no basis in reality," Ali Al-Naimi told a conference in Acapulco, according to the text of his speech.

Naimi called recent talk of a change in the country's strategy, in particular its cutting prices of Saudi oil to the US market, "a great deal of wild and inaccurate conjecture." "Saudi oil policy has remained constant for the past few decades, and it has not changed today," he said.

"We do not seek to politicise oil, nor do we collude against anybody. For us, it is a question of supply and demand. It is purely business."

Last week, Riyadh sent global oil prices tumbling when it cut its prices for crude for the US market while raising them for Asia, the country's major outlet.

Analysts guessed that the country wanted to strengthen its market share in the United States against a flood of domestic oil from shale deposits.

Some speculated as well that the Saudis aimed to drive down the price of crude to a point where shale production was not economically viable, forcing US producers to curb output.

The US shale oil boom has driven domestic production to record levels, nearly matching Saudi output and reducing the Middle East oil giant's longstanding power as the global swing producer which can determine the direction of crude prices.

Combined with slower growth in the global economy, the surge in US output especially has contributed to an oil glut and a plunge in prices, hitting hard the incomes of oil exporters.

The price for benchmark Brent crude has sunk from over US$112 a barrel in June to below US$83 Tuesday.

Markets were clearly not convinced on Wednesday, with Brent falling further to below the US$82 line. US benchmark West Texas Intermediate meanwhile fell 0.8 per cent to US$77.30 a barrel, compared to the June high of US$103.66.

Naimi stressed the need for a continued dialogue between the Saudi-led Opec cartel, which produces about one-third of the world's crude, and other producers as well as consumers.

"We want stable oil markets and steady prices, because this is good for producers, consumers and investors, and also helps long-term global economic growth, especially developing nations," he said.

http://www.businesstimes.com.sg/energy-c...gas-sector

EDB sees bright prospects for oil & gas sector
Asia's demand for energy will fuel industry's rapid growth; S'pore-based firms well-placed to ride this

By
Malminderjit Singhmsingh@sph.com.sg@MalminderjitBT
offshoreoil12.jpg A SENIOR official of the Singapore Economic Development Board (EDB) has sounded an upbeat note on the prospects for the marine and offshore industry in Singapore, despite short-term global uncertainties and the volatility of oil prices. PHOTO: KEPPEL CORPORATION LIMITED
13 Nov5:50 AM
Singapore

A SENIOR official of the Singapore Economic Development Board (EDB) has sounded an upbeat note on the prospects for the marine and offshore industry in Singapore, despite short-term global uncertainties and the volatility of oil prices.

Tan Kong Hwee, the EDB's deputy

From FT.com

IEA warns low oil prices threaten US shale investment
Anjli Raval and Neil Hume

Investment in US shale oilfields will fall by a tenth next year – and result in a decline in production – if the oil price continues to trade around $80 a barrel, the world’s energy watchdog has warned.

Wednesday’s forecast from the International Energy Agency is the clearest sign yet of the potential impact of the sharp drop in the price of Brent crude, in the wake of booming US oil production.

Fatih Birol, chief economist of the IEA, said that if the price of crude remained near this week’s four-year low, “there could be a 10 per cent decline in US light tight oil, or shale, investment in 2015 [from full-year 2014 levels]”.

Oil costs arabs $10-$25 a barrel to produce. With oversupply and slow demand growth, likely to hit sub $60 for both commodities the rate major producers are pumping it out. Minors will be on sale soon.

(13-11-2014, 08:06 AM)HitandRun Wrote: [ -> ]From FT.com

IEA warns low oil prices threaten US shale investment
Anjli Raval and Neil Hume

Investment in US shale oilfields will fall by a tenth next year – and result in a decline in production – if the oil price continues to trade around $80 a barrel, the world’s energy watchdog has warned.

Wednesday’s forecast from the International Energy Agency is the clearest sign yet of the potential impact of the sharp drop in the price of Brent crude, in the wake of booming US oil production.

Fatih Birol, chief economist of the IEA, said that if the price of crude remained near this week’s four-year low, “there could be a 10 per cent decline in US light tight oil, or shale, investment in 2015 [from full-year 2014 levels]”.

Shale oil extraction has a minimum cost that is around US$70.If oil drops to $50, all the shale oil activities will halt.
If it goes above $90, they will start to drill again.
So.. drill stop.. drill start.. drill stop.. drill start.. and then the oil price will just hover around $80-90..unless OPEC wants to subsidize the world with cheap oil.

Good also lah.. terrorists have less money to wreck havoc.
Putin also will be more humble.
And the rest of the developing countries have a chance to catchup with the atas countries.
Air is cleaner too since the power plants will be converted to use natural gas.

Thanks to this person and his gang..
http://www.forbes.com/profile/george-mitchell/

(13-11-2014, 12:26 AM)holy grail Wrote: [ -> ]Obama is punishing Putin for his invasion in Cremia! Low oil is also good for US economy and avoids stagflation. From this, it looks like the trend won't revert any time soon, until maybe the Fed start officially raising rates.

(11-11-2014, 04:02 PM)sgd Wrote: [ -> ]why is oil headed south?

Need to be a bit conspiracy theorist or imagine yourself as one.

A lot of oil exporting countries need oil to be minimum $80 to support their social programs back in their own country, countries like middle east including Russia.

Look at what's happen now ukraine situation. Sanctions against Russia + weakening oil could hurt and destabalize Russia but is also hurting US middle east allies who also need oil minimum $80 for their own programs. Russia is also world largest gold producer look at where the price of gold has been heading. All tied together.

what they doing to russia now is similar to what happen during the Reagan years that caused the soviet union to collapse.

Yes but I see it's not mere punishing but control, during the Reagan years they lured the Russians into expensive arms race in the Starwars program that bled the russians dry at the same time they also manipulated the Ruble by buying large quantities of it on the black market then redeeming them causing large outflows of forex destabalizing the Ruble. Today they trying to do it with oil prices.

Goldman Sachs has a 2015 target for oil price of US$70. But unlike the Reagan years today there's no expensive starwars project to lure the Russians into at best I see this will just turn into a pissing match between superpowers.

(13-11-2014, 08:33 AM)yeokiwi Wrote: [ -> ]

(13-11-2014, 08:06 AM)HitandRun Wrote: [ -> ]From FT.com

IEA warns low oil prices threaten US shale investment
Anjli Raval and Neil Hume

Investment in US shale oilfields will fall by a tenth next year – and result in a decline in production – if the oil price continues to trade around $80 a barrel, the world’s energy watchdog has warned.

Wednesday’s forecast from the International Energy Agency is the clearest sign yet of the potential impact of the sharp drop in the price of Brent crude, in the wake of booming US oil production.

Fatih Birol, chief economist of the IEA, said that if the price of crude remained near this week’s four-year low, “there could be a 10 per cent decline in US light tight oil, or shale, investment in 2015 [from full-year 2014 levels]”.

Shale oil extraction has a minimum cost that is around US$70.If oil drops to $50, all the shale oil activities will halt.
If it goes above $90, they will start to drill again.
So.. drill stop.. drill start.. drill stop.. drill start.. and then the oil price will just hover around $80-90..unless OPEC wants to subsidize the world with cheap oil.

Good also lah.. terrorists have less money to wreck havoc.
Putin also will be more humble.
And the rest of the developing countries have a chance to catchup with the atas countries.
Air is cleaner too since the power plants will be converted to use natural gas.

Thanks to this person and his gang..
http://www.forbes.com/profile/george-mitchell/

It's about delta. The low cost shale will continue to pump but new capacity will be limited. The growth of shale has plateau if oil stays below US$80 WTI. Business investments don't start and go based on what is oil price is tomorrow and next week. The uncertain outlook for oil to move back above US$100 is likely to crimp the whoole space for next 12 months at least.

GCC will be hurt by the lower oil price but their main expenditure is capex which actually can be deferred. US startegic interest will be hurt as their ambition to be energy sufficient with shale will be delayed, if ever.

Biggest beneficiary is actually China but net net I think the GCC and US had come to an agreement that this is a worthwhile tradeoff vs the global political outcome.

(20-10-2014, 11:57 AM)specuvestor Wrote: [ -> ]

(20-10-2014, 09:15 AM)Boon Wrote: [ -> ][Image: eqtf1j.jpg]

http://www.bloomberg.com/news/2014-10-17...om-it.html

I cant believe anyone would start a shale project based on break even price of $140. That makes no sense whatsoever.

My rough feel is that shale projects break even is roughly $80-90 oil price which is why I posted earlier shale should be losing money at $85 WTI

(28-10-2014, 08:56 AM)specuvestor Wrote: [ -> ]OPEC is important because they are major exporter. US is important because they are major importer. There is a difference. And China is major player increasingly

A bit ironic that I was championing shale more than a year ago in this forum when people were still skeptical but when people are fearful now i am saying shale production likely plateau if oil price remains $80 WTI or below

http://www.fool.sg/2014/10/23/are-oil-ga...il-prices/

i think ave ...as in the article." one of the most actively drilled areas in the US, ranges between US$58 to US$70 per barrel." . I assume the over all cost of producing one barrel of oil. So at 77( current price), i think it is still profitable, till it is 65$, then they may face problem. Saudi got no reason to reduce and benefit it competitor, the US oil producer. They got lot of cash, and can afford to produce more just to cover their lost revenue. I think we may be looking at a 60/65$ oil soon.

http://www.businesstimes.com.sg/energy-c...wth-a-push

Oil slide to give global growth a push
Observers say Asia's energy importers are most likely to benefit from the fall in prices

By
Teh Shi Ningtshining@sph.com.sg@TehShiNingBT
oilprices141114.jpg Sinking oil prices may spell gloom for producers but may be just what global growth needs. PHOTO: REUTERS
14 Nov5:50 AM
Singapore

SINKING oil prices may spell gloom for producers but may be just what global growth needs.

As oil prices sank below US$80 a barrel for the first time since 2010 on Thursday, observers say the slide in oil prices could lend an unexpected boost to the world economy's still fragile growth, with Asia's energy importers most likely to benefit.

Brent crude oil prices fell further from a four-year low, after the Organization of the Petroleum Exporting Countries (Opec)'s latest monthly report this week forecast that demand for Opec oil will drop to 29.2 million barrels per day (bpd) in 2015, about one million bpd less than what it currently produces.

The group meets in Vienna on Nov 27 to discuss whether to respond to what has been a 30 per cent slide in oil prices over the last five months by cutting output for the first time since 2008's global financial crisis. But Saudi Arabia - the world's largest oil exporter - has given no indication of whether it intends to cut production in the face of a growing oil glut.

While some read weak Chinese economic data released on Thursday - factory expansion slowed and investment growth was close to 13-year lows - as reinforcing how slower economic growth in emerging economies is crimping energy demand, others saw a silver lining.

An International Monetary Fund staff note, released early Thursday morning ahead of this weekend's G-20 Leaders' Summit, said that while weaker than expected economic activity has been one of several factors behind oil prices' sharp fall, "its impact on prices has initially been muted by precautionary demand and the restocking cycle".

Rather, in light of the greater oil supply, due to higher-than-expected production in non-Opec countries, led by shale oil in the United States and recovering output in Libya, the decline in prices should serve to boost global growth, the note said.

ABN AMRO analysts too, think tumbling oil prices could bring a "welcome boost for the fragile global economy", estimating in a note earlier this week that the recent US$30/barrel price fall could contribute about one per cent to global growth.

Lower oil prices shift wealth from oil exporters to oil importers, which tend to be more prepared to spend the capital gained, they said.

Speaking last week about long-term economic growth drivers, Monetary Authority of Singapore (MAS) managing director Ravi Menon noted also that the world's largest economies - the US, Japan, China and India - are among the largest net importers of oil. "Cheaper and more plentiful energy is akin to a supply-side boost to these economies," he said.

Without extrapolating too much from the recent fall in oil prices, he said that a "gentle, secular decline in the real price of oil is not an unrealistic assumption that, if true, should be a boon to global economic growth".

In this region, Morgan Stanley's Asean research analysts estimate that Thailand stands to gain most from falling oil prices, given its dependence on road rather than rail transport and the high proportion of oil in its energy consumption basket.

The other net oil importers - Indonesia, Singapore and the Philippines - follow, but Malaysia's small oil trade surplus could make falling oil prices a slight negative, a recent report said.

While Singapore may not be the biggest beneficiary of falling oil prices in this region, Bank of America Merrill Lynch economist Chua Hak Bin estimates that a 10 per cent fall in global oil prices could lift GDP growth here by about 0.1 percentage point.

Credit Suisse economist Michael Wan thinks that while the direct impact of lower oil prices on growth will be relatively small, the second-order impact from stronger global demand, such as through a boost in disposable household incomes in the US, could be "quite powerful" to the extent that it leads to stronger demand for Singapore's exports.

Barclays economist Leong Wai Ho thinks that Singapore stands to benefit mainly from a lower import bill for crude that will eventually mean lower inflation, as lower oil prices pass through to electricity prices with a three-month lag. "This reduces the upward pressure on core inflation, arising from tight labour conditions. It is a timely blessing for us," he said.

But the economists say any impact on inflation is likely to be insufficient to shift the central bank's position of allowing the Singapore dollar to appreciate against a basket of trading partners' currencies.

The MAS is likely to continue focusing on core inflation, which is driven more by wage cost pressures shaped by the tight domestic labour market, rather than energy costs, said Dr Chua.

Oil price slides 4 per cent to below $US75 a barrel
AP NOVEMBER 14, 2014 7:24AM

THE price of oil took another sharp tumble overnight as it appeared increasingly unlikely that OPEC members will cut production to staunch a plunge in prices that is entering its fifth month.

The lower oil prices are squeezing the revenue and profit of oil companies, but are still expected to give a lift to the US economy because airlines, shippers, and consumers are paying much less for fuel.

“Gasoline is an input to almost everything that is made in this economy,” said Michael Noel, an economist at Texas Tech University.

Benchmark US crude fell $US2.97, or 4 per cent, to close at $US74.21. It is down 31 per cent since late June to its lowest level since September of 2010.

Brent crude, a benchmark for international crudes that is closely correlated with the price of gasoline in the US, fell $US2.46 to close at $US77.92, also its lowest level in four years.

Global crude supplies have been rising recently as production has increased in the US, Libya, Iraq and elsewhere. At the same time, demand for crude has been weaker than expected because of slowing economic growth in Asia and Europe.

The Organisation of Petroleum Exporting Countries is scheduled to hold a meeting later this month at which its 12 members will almost certainly discuss cutting production in an effort to push prices back up.

OPEC countries increasingly need high oil prices to fund growing government budgets.

But comments by oil ministers from Saudi Arabia and Kuwait in recent days seem to suggest OPEC is unlikely to agree to a cut. If OPEC keeps supplies flowing, the price of oil could fall even further.

“The ‘What me worry?’ attitude coming out of OPEC will continue to push oil lower,” said energy analyst Stephen Schork in an interview.

The US Energy Department said on Wednesday that low fuel prices were expected to last into next year.