Analyst: Impossible for Saudis to destroy U.S. shale industry

Because of its mid-cost nature, compared to the high cost of conventional drilling, shale will rebound quickly, according to Daniel Yergin, founder of IHS Cambridge Energy Research Associates, who said groups are already in place to grab the assets of bankrupt U.S. shale drillers.

“The management may change and the companies may change but the resources will still be there,” Yergin told the Daily Telegraph. Continue reading

Russia Breaking Wall St Oil Price Monopoly

Russia has just taken significant steps that will break the present Wall Street oil price monopoly, at least for a huge part of the world oil market. The move is part of a longer-term strategy of decoupling Russia’s economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy.

Later in November the Russian Energy Ministry has announced that it will begin test-trading of a new Russian oil benchmark. While this might sound like small beer to many, it’s huge. If successful, and there is no reason why it won’t be, the Russian crude oil benchmark futures contract traded on Russian exchanges, will price oil in rubles and no longer in US dollars. It is part of a de-dollarization move that Russia, China and a growing number of other countries have quietly begun. Continue reading

Global markets sell-off as the world drowns in oil

An upgrade to US oil production and Opec holding firm on output sends the oil price and global markets tumbling

Global financial markets have taken fright at yet more signs that the hammered oil price will not make a swift recovery.

The markets reacted to the US revising its crude oil production upwards for 2015 and signs that the Organization of Petroleum Exporting Countries will maintain production at current levels.

Continue reading

Oil fall could lead to capex collapse: DoubleLine’s Gundlach

(Reuters) – DoubleLine Capital’s Jeffrey Gundlach said on Tuesday there is a possibility of a “true collapse” in U.S. capital expenditures and hiring if the price of oil stays at its current level.

Gundlach, who correctly predicted government bond yields would plunge in 2014, said on his annual outlook webcast that 35 percent of Standard & Poor’s capital expenditures comes from the energy sector and if oil remains around the $45-plus level or drops further, growth in capital expenditures could likely “fall to zero.”

Gundlach, the co-founder of Los Angeles-based DoubleLine, which oversees $64 billion in assets, noted that “all of the job growth in the (economic) recovery can be attributed to the shale renaissance.” He added that if low oil prices remain, the U.S. could see a wave of bankruptcies from some leveraged energy companies. Continue reading

Saudi prince: $100-a-barrel oil ‘never’ again

Saudi billionaire businessman Prince Alwaleed bin Talal told me we will not see $100-a-barrel oil again. The plunge in oil prices has been one of the biggest stories of the year. And while cheap gasoline is good for consumers, the negative impact of a 50% decline in oil has been wide and deep, especially for major oil producers such as Saudi Arabia and Russia. Even oil-producing Texas has felt a hit. The astute investor and prince of the Saudi royal family spoke to me exclusively last week as prices spiraled below $50 a barrel. He also predicted the move would dampen what has been one of the big U.S. growth stories: the shale revolution. In fact, in the last two weeks, several major rig operators said they had received early cancellation notices for rig contracts. Companies apparently would rather pay to cancel rig agreements than keep drilling at these prices. His royal highness, who has been critical of Saudi Arabia’s policies that have allowed prices to fall, called the theory of a plan to hurt Russian President Putin with cheap oil “baloney” and said the sharp sell-off has put the Saudis “in bed” with the Russians. The interview has been edited for clarity and length.

Q: Can you explain Saudi Arabia’s strategy in terms of not cutting oil production?

A: Saudi Arabia and all of the countries were caught off guard. No one anticipated it was going to happen. Anyone who says they anticipated this 50% drop (in price) is not saying the truth. Continue reading

OPEC Policy Ensures U.S. Shale Crash, Russian Tycoon Says

As mentioned in a previous post, the economic war on American shale oil is in motion — and seemingly not far away from achieving its goal.

 

OPEC policy on crude production will ensure a crash in the U.S. shale industry, a Russian oil tycoon said.

The Organization of Petroleum Exporting Countries kept output targets unchanged at a meeting in Vienna today even after this year’s slump in the oil price caused by surging supply from U.S shale fields.

American producers risk becoming victims of their own success. At today’s prices of just over $70 a barrel, drilling is close to becoming unprofitable for some explorers, Leonid Fedun, vice president and board member at OAO Lukoil (LKOD), said in an interview in London. Continue reading

ISIS Makes Up To $3 Million a Day Selling Oil, Say Analysts

For two weeks, the Islamic State of Iraq and Syria (ISIS) and forces loyal to Bashar al-Assad have been battling for control of the Shaar gas field, one of Syria’s largest, near the landmark city of Palmyra. On July 19, it was reported that the Sunni militant group had killed 270 regime fighters, taking control of the field in what was reportedly one of the conflict’s deadliest 48-hour periods to date.

As ISIS steams further into Syria, analysts say a significant portion of its financial resources come from the crude oil it sells on the black market; accordingly, oil fields have become prime targets in the fight. So do gas fields like Shaar, where disruption of lines lead to electricity shortages and power cuts in regime-controlled areas as far as Damascus. Continue reading