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Saudi Arabia Starts All-Out Oil War: MbS Destroys OPEC By Flooding Market, Slashing Oil Prices
...Following Friday's shocking collapse of OPEC+, when Russia and Riyadh were unable to reach an agreement during the OPEC+ summit in Vienna which was seeking up to 1.5 million b/d in further oil production cuts, on Saturday Saudi Arabia kick started what Bloomberg called an all-out oil war, slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in an effort to push as many barrels into the market as possible. ...
...In the most significant move, Aramco widened the discount for its flagship Arab Light crude to refiners in north-west Europe by a hefty $8 a barrel, offering it at $10.25 a barrel under the Brent benchmark. In contrast, Urals, the Russian flagship crude blend, trades at a discount of about $2 a barrel under Brent. Traders said the Saudi move was a direct attack at the ability of Russian companies to sell crude in Europe. ...
...And the second indication that the OPEC oil cartel is now effectively dead, came a few hours later when Bloomberg again reported that in addition to huge price cuts, Saudi Arabia was set to flood the market with a glut of oil to steal market share and capitalize on its just announced massive price cuts as the kingdom plans to increase oil output next month, going well above 10 million barrels a day. In addition to slashing prices, Saudi Arabia has privately told some market participants it could raise production much higher if needed, even going to a record of 12 million barrels a day, according to Bloomberg sources. ...
...What is the logic behind the Saudi decision?
According to one take, the shock-and-awe Saudi strategy could be an attempt to impose maximum pain in the quickest possible way to both Russia and other producers, most notably shale, in an effort to bring them back to the negotiating table, and then quickly reverse the production surge and start cutting output if a deal is achieved. ...
...Instead, the most likely outcome is that Russia will be able to withstand a shock price far longer than Saudi Arabia, which has budgeted for a Brent price of $58/b for 2020 (which would lead to a 6.4% budget deficit). A realized price which is roughly half that - should the Saudi strategy work out as planned - would lead to social unrest and government turmoil in Saudi Arabia, and may explain why earlier today Saudi crown prince MbS launched another crackdown on dozens of royals and army officers following the arrest of powerful princes, who may compete for the throne once the public mood in Saudi Arabia turns nasty in the coming weeks. ...
https://www.zerohedge.com/commodities/sa...oil-prices
Saudi Arabia Starts All-Out Oil War: MbS Destroys OPEC By Flooding Market, Slashing Oil Prices
...Following Friday's shocking collapse of OPEC+, when Russia and Riyadh were unable to reach an agreement during the OPEC+ summit in Vienna which was seeking up to 1.5 million b/d in further oil production cuts, on Saturday Saudi Arabia kick started what Bloomberg called an all-out oil war, slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in an effort to push as many barrels into the market as possible. ...
...In the most significant move, Aramco widened the discount for its flagship Arab Light crude to refiners in north-west Europe by a hefty $8 a barrel, offering it at $10.25 a barrel under the Brent benchmark. In contrast, Urals, the Russian flagship crude blend, trades at a discount of about $2 a barrel under Brent. Traders said the Saudi move was a direct attack at the ability of Russian companies to sell crude in Europe. ...
...And the second indication that the OPEC oil cartel is now effectively dead, came a few hours later when Bloomberg again reported that in addition to huge price cuts, Saudi Arabia was set to flood the market with a glut of oil to steal market share and capitalize on its just announced massive price cuts as the kingdom plans to increase oil output next month, going well above 10 million barrels a day. In addition to slashing prices, Saudi Arabia has privately told some market participants it could raise production much higher if needed, even going to a record of 12 million barrels a day, according to Bloomberg sources. ...
...What is the logic behind the Saudi decision?
According to one take, the shock-and-awe Saudi strategy could be an attempt to impose maximum pain in the quickest possible way to both Russia and other producers, most notably shale, in an effort to bring them back to the negotiating table, and then quickly reverse the production surge and start cutting output if a deal is achieved. ...
...Instead, the most likely outcome is that Russia will be able to withstand a shock price far longer than Saudi Arabia, which has budgeted for a Brent price of $58/b for 2020 (which would lead to a 6.4% budget deficit). A realized price which is roughly half that - should the Saudi strategy work out as planned - would lead to social unrest and government turmoil in Saudi Arabia, and may explain why earlier today Saudi crown prince MbS launched another crackdown on dozens of royals and army officers following the arrest of powerful princes, who may compete for the throne once the public mood in Saudi Arabia turns nasty in the coming weeks. ...
https://www.zerohedge.com/commodities/sa...oil-prices
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