It can go as low as it takes for the Saudi’s to crush American producers out of business.
And they have a lot of money to finance themselves at a loss while doing it, which American producers do not.
I’m thinking this would happen somewhat below $30/bbl if it stayed there very long, it depends a lot on whether the current administration thinks our oil industry is vital to us or not.
kokoda
January 7, 2016 9:32 am
Did these financial research firms use the IPCC Models for their predictions?
Gator
January 7, 2016 9:36 am
I said a long time ago, when it broke 75, that it would go all the way down to 25. I stand by that. Usually you would see it spiking with the ME tensions, but even with SA and Iran’s little spat, nothing. Trade is collapsing. With the baltic dry index at or near record lows, low oil makes sense. The only things, IMO, that will make it go up, are, in order of low to high probability: a new economic boom that sees increasing trade between countries and therefore much more economic activity(haha, funny right?), an actual shooting war between major producers in the middle east, or a new round of money printing by the fed or another major central bank.
card802
January 7, 2016 11:19 am
“The Kingdom is burning through dollar reserves accrued through a decade of high oil prices to prop up its currency. Those reserves fell to $635.2 billion at the end of November, down 15% from a peak of $746 billion in August last year, according to the latest central bank data.
Saudi Arabia exports about 7 million barrels of oil a day, and that revenue makes up around 90% of the government’s fiscal revenue.
But the price of oil has fallen by more than half since the middle of 2014, forcing the kingdom to run a record deficit of nearly 367 billion riyals ($98 billion) last year.
As the oil slump burns a hole in Saudi Arabia’s budget, pressure is growing on the world’s top crude exporter to ditch its currency’s three-decade old peg to the dollar.
The falling oil price has pressured Riyadh’s coffers, pushing the government to lay out budget cuts last week. The clash with Iran could magnify regional tensions and push Saudi Arabia’s defense costs up as it fights an expensive war in Yemen and supports allies in conflicts elsewhere.
To be sure, most analysts believe that the peg will hold.”
robert h siddell jr
January 7, 2016 12:27 pm
Saudis government has $635B savings and an annual deficit of $89B so they can last about 635/98=6.5 years. If that isn’t long enough, they could sell more Saudi stocks and bonds for dollars. They could print more Riyals and insist everybody use Riyals to buy their oil. They could sell their gold for dollars if they are brain dead stupid. They could cut off the oil like 1973 and really kill us as the price goes above $200 per barrel. We could just print more dollars to also subsidize our oil companies (along with welfare, warfare and Elite graft) and hasten the day of out economic death by dollar hyper-inflation. It’s a high stakes poker game until the USA goes broke (oil in the ground and a pile of real gold will eventually beat counterfeit currency). The USA going tits up will hurt SA’s biggest customer (China) but they have the biggest pile of gold in the world to spend (whereas Fort Knox was robbed clean under Blow Job Bill). We could lose big time if we are not very careful one way or the other and my money bets it will be a lot less than 6.5 years if Hillary becomes POTUS.
DC Sunsets
January 7, 2016 1:39 pm
It’s in a downtrend, but I’d not be shorting it here.
It can go as low as it takes for the Saudi’s to crush American producers out of business.
And they have a lot of money to finance themselves at a loss while doing it, which American producers do not.
I’m thinking this would happen somewhat below $30/bbl if it stayed there very long, it depends a lot on whether the current administration thinks our oil industry is vital to us or not.
Did these financial research firms use the IPCC Models for their predictions?
I said a long time ago, when it broke 75, that it would go all the way down to 25. I stand by that. Usually you would see it spiking with the ME tensions, but even with SA and Iran’s little spat, nothing. Trade is collapsing. With the baltic dry index at or near record lows, low oil makes sense. The only things, IMO, that will make it go up, are, in order of low to high probability: a new economic boom that sees increasing trade between countries and therefore much more economic activity(haha, funny right?), an actual shooting war between major producers in the middle east, or a new round of money printing by the fed or another major central bank.
“The Kingdom is burning through dollar reserves accrued through a decade of high oil prices to prop up its currency. Those reserves fell to $635.2 billion at the end of November, down 15% from a peak of $746 billion in August last year, according to the latest central bank data.
Saudi Arabia exports about 7 million barrels of oil a day, and that revenue makes up around 90% of the government’s fiscal revenue.
But the price of oil has fallen by more than half since the middle of 2014, forcing the kingdom to run a record deficit of nearly 367 billion riyals ($98 billion) last year.
As the oil slump burns a hole in Saudi Arabia’s budget, pressure is growing on the world’s top crude exporter to ditch its currency’s three-decade old peg to the dollar.
The falling oil price has pressured Riyadh’s coffers, pushing the government to lay out budget cuts last week. The clash with Iran could magnify regional tensions and push Saudi Arabia’s defense costs up as it fights an expensive war in Yemen and supports allies in conflicts elsewhere.
To be sure, most analysts believe that the peg will hold.”
Saudis government has $635B savings and an annual deficit of $89B so they can last about 635/98=6.5 years. If that isn’t long enough, they could sell more Saudi stocks and bonds for dollars. They could print more Riyals and insist everybody use Riyals to buy their oil. They could sell their gold for dollars if they are brain dead stupid. They could cut off the oil like 1973 and really kill us as the price goes above $200 per barrel. We could just print more dollars to also subsidize our oil companies (along with welfare, warfare and Elite graft) and hasten the day of out economic death by dollar hyper-inflation. It’s a high stakes poker game until the USA goes broke (oil in the ground and a pile of real gold will eventually beat counterfeit currency). The USA going tits up will hurt SA’s biggest customer (China) but they have the biggest pile of gold in the world to spend (whereas Fort Knox was robbed clean under Blow Job Bill). We could lose big time if we are not very careful one way or the other and my money bets it will be a lot less than 6.5 years if Hillary becomes POTUS.
It’s in a downtrend, but I’d not be shorting it here.
[img]http://www.cmegroup.com/apps/cmegroup/widgets/productLibs/esignal-charts.html?code=CL&monthYear=G6&year=2016&venue=1&title=FEB_2016_Crude_Oil_&type=p&exchangeCode=XNYM&dataWidget=true&chartMode=static[/img]
I’ll take oil at $10 a barrel Alex.
WC, at 10 bucks, I’m all in!