Saudis vs. Rooskies: Who ya got?

[FireFoley]

It's Sunday nite and crude oil has fallen to about 30 bux a barrel and could be headed lower. 10yr treasury trading at 1/2% and stock futures are limit down. Russia refused to go along with an oil output cut at the OPEC+ meeting on Friday so the Saudis have decided to say if that is how you want to play, we will up our production. Russia may think they are being shrewd but being that Saudi Arabia can get a barrel of oil out of the ground at a significantly lower price to the Russians, me thinks that there will be a second thought in the near future.

 

[Gator By Marriage]

It's Sunday nite and crude oil has fallen to about 30 bux a barrel and could be headed lower. 10yr treasury trading at 1/2% and stock futures are limit down. Russia refused to go along with an oil output cut at the OPEC+ meeting on Friday so the Saudis have decided to say if that is how you want to play, we will up our production. Russia may think they are being shrewd but being that Saudi Arabia can get a barrel of oil out of the ground at a significantly lower price to the Russians, me thinks that there will be a second thought in the near future.

While I know enough about this commodity to know not all oil is created equal, I don’t know who has a lot of what. Who in this fight has the “better oil,” i.e., more light sweet crude and is this a factor?

 

[Detroitgator]

It's Sunday nite and crude oil has fallen to about 30 bux a barrel and could be headed lower. 10yr treasury trading at 1/2% and stock futures are limit down. Russia refused to go along with an oil output cut at the OPEC+ meeting on Friday so the Saudis have decided to say if that is how you want to play, we will up our production. Russia may think they are being shrewd but being that Saudi Arabia can get a barrel of oil out of the ground at a significantly lower price to the Russians, me thinks that there will be a second thought in the near future.

I picked up a chunk of SCO and UGL 9 days ago. Will take 2/3rds of the SCO off in the morning depending on what's happened by then, will hold the UGL for now.

 

[soflagator]

They’ll both get hit. The Saidi’s can achieve it cheaper but have a higher overall break even. The Russians, the opposite.

But a real loss here is domestic. When it actually trickles down to the consumer’s pump, it will help. But because we have become a net exporter, there will be significant hit right here—up, mid and downstream. There are groups shutting down because of tonight and that will eventually take its toll on our economy, low prices or not. That will have its own unintended impact on our impact, as we will see a shutting of current projects and an abandoning of new ones. It’s bad right now.

 

[GatorInGeorgia]

It's Sunday nite and crude oil has fallen to about 30 bux a barrel and could be headed lower. 10yr treasury trading at 1/2% and stock futures are limit down. Russia refused to go along with an oil output cut at the OPEC+ meeting on Friday so the Saudis have decided to say if that is how you want to play, we will up our production. Russia may think they are being shrewd but being that Saudi Arabia can get a barrel of oil out of the ground at a significantly lower price to the Russians, me thinks that there will be a second thought in the near future.

You’re correct about SA getting oil out of ground cheaper, but only if you’re looking at pure cost to pull it out of the ground. If you add in what SA needs to fund their social state/welfare programs their costs are much higher than Russia’s. My understanding is that Russia’s all-in breakeven is around $42 per barrel and SA’s is about $80.

 

[g8r.tom]

It's Sunday nite and crude oil has fallen to about 30 bux a barrel and could be headed lower. 10yr treasury trading at 1/2% and stock futures are limit down. Russia refused to go along with an oil output cut at the OPEC+ meeting on Friday so the Saudis have decided to say if that is how you want to play, we will up our production. Russia may think they are being shrewd but being that Saudi Arabia can get a barrel of oil out of the ground at a significantly lower price to the Russians, me thinks that there will be a second thought in the near future.

The Saudis are also aiming at US shale producers and hoping to put some out of business like the last time they did this. While that did disrupt the US shale industry, it also made them better as the ones that survived improved production techniques and that lowered production costs.

 

[Concrete Helmet]

Ok....help a simpleton understand this....We produce more oil/energy than ANYONE in the World.....We have to be making it less expensive due to tariffs and transportation, right? That should mean we sell cheaper to Americans AND make more profit margin doing so....Why is this a big deal and why is the Oil and Energy sector struggling......Makes no sense to me????

 

[FireFoley]

Ok....help a simpleton understand this....We produce more oil/energy than ANYONE in the World.....We have to be making it less expensive due to tariffs and transportation, right? That should mean we sell cheaper to Americans AND make more profit margin doing so....Why is this a big deal and why is the Oil and Energy sector struggling......Makes no sense to me????

Okay I will take a stab. First off the world is awash in oil, including US and we are too stubborn to back off production. When oil was 80-90 bux a barrel and fracking became a thing making shythole towns in North Dakota rich, everyone thought great. Well those towns are now ghostlike. We can't get a barrel of oil out of the ground at 5 bux/barrel like Saudi Arabia can, but as somewhat noted we don;t have to support an entire population on oil.

To me this oil rout is going to make many highly leveraged companies go bye bye, and the stronger ones can pick up the wells and land at good prices. Then hopefully we can curb production to where companies can make money without having oil go back to 100. Bottom line. Must cut back the production.

BTW as I predicted when OXY bought APC for 50+ Billion and outbid CVX, I predicted CVX would buy the combined OXY for less than the APC deal. Well today the combined OXY-APC is worth a mere 15 Billion. Nice going OXY

 

[g8r.tom]

It used to cost our shale companies about $50 a barrel to get it out of the ground. A few years ago Saudi got afraid of our production and drove prices down and many US shale companies went out of business. The ones that made it through did so because they improved their methods. Many of them are now profitable at costs below $50. Some even in the $35 area. WTI crude (shale oil) closed at $32.49 today. Russia and Saudi get it out cheaper than us. It’s not sustainable for our shale companies at these prices.

Once the virus is not a big issue the markets will take off, and oil prices will rise. The key is how long that takes and how many shale producers can make it though.