The Saudi-led OPEC cuts may have supported oil prices and reduced market volatility, but they have also opened the door wide to rival crude grades flowing into the most prized market for the Middle Eastern producers: Asia.
Reduced supplies by OPEC resulted in higher prices for Middle Eastern crude benchmark Dubai and a narrower Brent/Dubai spread, which made the shipment of Brent-price-linked crude grades to Asia profitable. Continue reading
Saudi Arabia’s economic war on America’s oil industry will soon start to show its effect. Declining prices mean less profit. Less profit means operating costs, mainly wages, are unsustainable. Unustainable operating costs mean layoffs and bankruptcies. This leads to collapse of the oil industry.
Three major investment banks — Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc. — now expect the price of oil to crash through the $30 threshold and into $20 territory in short order as a result of China’s slowdown, the U.S. dollar’s appreciation and the fact that drillers from Houston to Riyadh won’t quit pumping despite the oil glut. Continue reading