“Shale Revolution” devours its children
Brent oil is already worth less than 48 dollars per barrel. And it is clear to all market players that prices will continue to fall. One gets the impression that some oil traders are even happy about this. No, not Russia, not Venezuela, but Saudi Arabia rejoices. Statements of her other subjects suggest the right thought: the price will collapse to twenty per barrel. And with it, the US shale economy will collapse.
Kommersant writes that the pre-New Year anti-crisis scenarios of the Russian government "lost relevance in the early days of the coming 2015 year", because even the pessimistic forecasts of economists were based on the average annual price of "Brent" in 60 dollars per barrel.
The media noted that the price of oil continues to fall. According to information RBC, February futures for a barrel of Brent oil fell in price below 48 dollars.
Known forecast analysts «Goldman Sachs». According to them, in the first half of 2015, oil prices will be about $ 40 per barrel.
One of the reasons for the fall in prices is a statement by Saudi prince al-Walid Talal al-Saud. He said that oil will never cost 100 dollars per barrel.
Interview with the Prince took the newspaper USA Today (January 11 material released).
According to Saudi billionaire Prince Al-Walid bin Talal, the world will never again see the price of 100 dollars per barrel of oil. The fall in 50% prices in 2014 has already had a negative impact (“wide and deep”) on major oil producers such as Saudi Arabia and Russia. Already, oil-producing Texas felt a blow.
The “insightful investor” (as the publication calls him), the prince of the royal family of Saudi Arabia, predicted that the fall in prices would hit the economic growth in the United States, which was caused by the “shale revolution”. Over the past two weeks, several large drilling rig operators have reported receiving notifications canceling drilling contracts. This means that it is more profitable for companies to pay the operator (penalties for cancellation) than to drill at current prices.
His Royal Highness said that the press talk about Saudi Arabia’s allegedly existing intention of “harming the cheapening of oil to Russian President Putin” is “nonsense,” because the sharp drop in prices caught the Saudis just as unawares as the Russians. “Saudi Arabia and all countries were taken by surprise,” the prince said. “No one expected this to happen.” The one who says that he foresaw this 50% drop says nothing. ”
The decision of Saudi Arabia not to reduce production, the prince considers "reasonable" and "insightful". If Riyadh reduces production by 1 or 2 million barrels per day, these 1 or 2 million will be produced and sold by other countries. That is, Saudi Arabia will produce less (give up part of the market), and receive less profit. Will not work.
According to the prince, prices are affected by oversupply in the global market. “Now Iraq is producing a lot,” he said. “Even Libya, where there is a civil war, is still producing oil.” The US is currently producing both oil and gas in shale. Thus, there is an excess of supply on the market. ”
However, the Saudis noted weak demand. Japan’s economic growth is almost zero, China’s growth will decline, India’s growth has halved, and Germany is waiting for about the same decline. The demand for oil is decreasing, the excess oil on the market is growing. Hence the fall in prices.
“If supplies remain at the current level, and demand remains weak, then you better believe that the price will go even lower,” says the prince. “However, if some players leave the market and there is some increase in demand, prices can go up.” But I am sure that we will never see more prices in 100 dollars per barrel ... "
Al-Walid bin Talal spoke out about “pressure on Russia” - that is, about the “conspiracy” in which the United States and Saudi Arabia allegedly participate, who have decided to repay Putin for what he “did in Ukraine”.
“Two words: nonsense and nonsense,” said the prince. “I tell you, there is no way Saudi Arabia could do it. Because Saudi Arabia is as bad as Russia, period. <...> And there is no political conspiracy against Russia. "
As for the American shale, the prince here spoke very cautiously, noting that the collapse of the relevant industry in the US is questionable, because the shale and shale gas are “new products on the market”. And "no one knows for sure what price for shale will be a turning point." However, the Saudi said that shale oil has a “higher production cost”. Is it advisable to produce such oil at a price of 50 dollars per barrel? "It is not clear," said the prince. This industry is still developing.
The hazy statements of a man from Riyadh suggest that the prince knows much more than he voices.
And for sure: «Bloomberg» He writes about the emerging crisis in the case for the use of shale.
After a six-month drop in oil prices, American shaleburs "sent a clear signal": they are retreating. Big problems for operators in Texas and North Dakota. The publication marks the “largest drop” in drilling (by 35% in just a week!) Since the “drilling boom” six years ago.
The publication believes that this very “boom” ultimately led to a “global price war”. The warring parties, according to Bloomberg, are the United States and OPEC.
"The largest decline in a decade and seventh in a row threatens to halt US economic growth," the newspaper notes. A drop in the price below 50 dollars per barrel leads to a halt of drilling rigs.
If oil prices do not recover, an absolute end will come to shale drilling, says James Williams, a top manager of the consulting company WTRG Economics.
It is also interesting that the drilling will be less and less, but the US seems to set a new record in oil production by the end of the current year. In the US, an average of 9.130.000 barrels per day is produced (data from the last four weeks). “You will not see a decrease in growth rates until the second half of 2015, and it will not manifest itself until 2016,” the expert notes.
Three driller operators, Helmerich & Payne Inc., Pioneer Energy Services Corp. and Ensign Energy Services Inc. have been instructed to early terminate drilling contracts. The last of the named companies has already laid off 700 workers.
But the data of oilfield services company "Baker Hughes".
Only from 5 to 9 in January in the USA was the 61 drilling rig stopped. Over the past year, the change was not so significant: the number of drilling rigs was reduced by 4 units (for comparison: in Canada - by 111).
Oil market analysts know that a noticeable drop in the number of working rigs reflects the current decline in the shale industry (in the so-called horizontal drilling).
Mindful of the cautious statements of the Saudi prince about the shale industry in the United States and taking into account the opinion of authoritative experts from Bloomberg, who believe that the shale boom is the cause of a price war, we can conclude: Saudi Arabia wants to reduce oil supply on the world market. The oil surplus is caused by the growth of shale production in the USA, which in the process of price war will not withstand the competition. In the coming months, the price will drop to forty dollars per barrel and go lower - and in America, drilling will stop completely.
It is then that the Saudis will take their money: after all, they did not stop saturating the market with oil. The American recession will inevitably cause a rise in oil prices in the world. The only question is when. And the other question is whether the Americans will then take the risk of “horizontal drilling” again. The last question can be answered, however, it is possible: American drillers will calculate long-term risks and measure them out seven times before they stop ... once.
Kommersant writes that the pre-New Year anti-crisis scenarios of the Russian government "lost relevance in the early days of the coming 2015 year", because even the pessimistic forecasts of economists were based on the average annual price of "Brent" in 60 dollars per barrel.
The media noted that the price of oil continues to fall. According to information RBC, February futures for a barrel of Brent oil fell in price below 48 dollars.
Known forecast analysts «Goldman Sachs». According to them, in the first half of 2015, oil prices will be about $ 40 per barrel.
One of the reasons for the fall in prices is a statement by Saudi prince al-Walid Talal al-Saud. He said that oil will never cost 100 dollars per barrel.
Interview with the Prince took the newspaper USA Today (January 11 material released).
According to Saudi billionaire Prince Al-Walid bin Talal, the world will never again see the price of 100 dollars per barrel of oil. The fall in 50% prices in 2014 has already had a negative impact (“wide and deep”) on major oil producers such as Saudi Arabia and Russia. Already, oil-producing Texas felt a blow.
The “insightful investor” (as the publication calls him), the prince of the royal family of Saudi Arabia, predicted that the fall in prices would hit the economic growth in the United States, which was caused by the “shale revolution”. Over the past two weeks, several large drilling rig operators have reported receiving notifications canceling drilling contracts. This means that it is more profitable for companies to pay the operator (penalties for cancellation) than to drill at current prices.
His Royal Highness said that the press talk about Saudi Arabia’s allegedly existing intention of “harming the cheapening of oil to Russian President Putin” is “nonsense,” because the sharp drop in prices caught the Saudis just as unawares as the Russians. “Saudi Arabia and all countries were taken by surprise,” the prince said. “No one expected this to happen.” The one who says that he foresaw this 50% drop says nothing. ”
The decision of Saudi Arabia not to reduce production, the prince considers "reasonable" and "insightful". If Riyadh reduces production by 1 or 2 million barrels per day, these 1 or 2 million will be produced and sold by other countries. That is, Saudi Arabia will produce less (give up part of the market), and receive less profit. Will not work.
According to the prince, prices are affected by oversupply in the global market. “Now Iraq is producing a lot,” he said. “Even Libya, where there is a civil war, is still producing oil.” The US is currently producing both oil and gas in shale. Thus, there is an excess of supply on the market. ”
However, the Saudis noted weak demand. Japan’s economic growth is almost zero, China’s growth will decline, India’s growth has halved, and Germany is waiting for about the same decline. The demand for oil is decreasing, the excess oil on the market is growing. Hence the fall in prices.
“If supplies remain at the current level, and demand remains weak, then you better believe that the price will go even lower,” says the prince. “However, if some players leave the market and there is some increase in demand, prices can go up.” But I am sure that we will never see more prices in 100 dollars per barrel ... "
Al-Walid bin Talal spoke out about “pressure on Russia” - that is, about the “conspiracy” in which the United States and Saudi Arabia allegedly participate, who have decided to repay Putin for what he “did in Ukraine”.
“Two words: nonsense and nonsense,” said the prince. “I tell you, there is no way Saudi Arabia could do it. Because Saudi Arabia is as bad as Russia, period. <...> And there is no political conspiracy against Russia. "
As for the American shale, the prince here spoke very cautiously, noting that the collapse of the relevant industry in the US is questionable, because the shale and shale gas are “new products on the market”. And "no one knows for sure what price for shale will be a turning point." However, the Saudi said that shale oil has a “higher production cost”. Is it advisable to produce such oil at a price of 50 dollars per barrel? "It is not clear," said the prince. This industry is still developing.
The hazy statements of a man from Riyadh suggest that the prince knows much more than he voices.
And for sure: «Bloomberg» He writes about the emerging crisis in the case for the use of shale.
After a six-month drop in oil prices, American shaleburs "sent a clear signal": they are retreating. Big problems for operators in Texas and North Dakota. The publication marks the “largest drop” in drilling (by 35% in just a week!) Since the “drilling boom” six years ago.
The publication believes that this very “boom” ultimately led to a “global price war”. The warring parties, according to Bloomberg, are the United States and OPEC.
"The largest decline in a decade and seventh in a row threatens to halt US economic growth," the newspaper notes. A drop in the price below 50 dollars per barrel leads to a halt of drilling rigs.
If oil prices do not recover, an absolute end will come to shale drilling, says James Williams, a top manager of the consulting company WTRG Economics.
It is also interesting that the drilling will be less and less, but the US seems to set a new record in oil production by the end of the current year. In the US, an average of 9.130.000 barrels per day is produced (data from the last four weeks). “You will not see a decrease in growth rates until the second half of 2015, and it will not manifest itself until 2016,” the expert notes.
Three driller operators, Helmerich & Payne Inc., Pioneer Energy Services Corp. and Ensign Energy Services Inc. have been instructed to early terminate drilling contracts. The last of the named companies has already laid off 700 workers.
But the data of oilfield services company "Baker Hughes".
Only from 5 to 9 in January in the USA was the 61 drilling rig stopped. Over the past year, the change was not so significant: the number of drilling rigs was reduced by 4 units (for comparison: in Canada - by 111).
Oil market analysts know that a noticeable drop in the number of working rigs reflects the current decline in the shale industry (in the so-called horizontal drilling).
Mindful of the cautious statements of the Saudi prince about the shale industry in the United States and taking into account the opinion of authoritative experts from Bloomberg, who believe that the shale boom is the cause of a price war, we can conclude: Saudi Arabia wants to reduce oil supply on the world market. The oil surplus is caused by the growth of shale production in the USA, which in the process of price war will not withstand the competition. In the coming months, the price will drop to forty dollars per barrel and go lower - and in America, drilling will stop completely.
It is then that the Saudis will take their money: after all, they did not stop saturating the market with oil. The American recession will inevitably cause a rise in oil prices in the world. The only question is when. And the other question is whether the Americans will then take the risk of “horizontal drilling” again. The last question can be answered, however, it is possible: American drillers will calculate long-term risks and measure them out seven times before they stop ... once.
Observed and translated by Oleg Chuvakin
- especially for topwar.ru
- especially for topwar.ru
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