Saudi Arabia vs Iran
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Probably not economic or social oblivion. But very likely political and military oblivion. Their political and military influence in the world and the region would likely drop to essentially where Jordan is now. Meaning pretty close to nothing.
If as suspected the Saudi's slow oil production to push prices up then the Iranians may just push their production up to compensate for the gap and increase income. Will seriously annoy the Saudi's who need the money. Other benefactor of this will be the US shale producers who start in part to become more profitable to fully re-enter the market.
Either way the Saudi's could be economically screwed into the ground and that gives potential for internal unrest and the House of Saud is destabilised.
Maybe it is fast approaching for the expats to consider their positions and have a holiday in Dubai?
Either way the Saudi's could be economically screwed into the ground and that gives potential for internal unrest and the House of Saud is destabilised.
Maybe it is fast approaching for the expats to consider their positions and have a holiday in Dubai?
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The Economist had an interesting article this week - the legacy oil producers are being stuffed as shale oil/gas (very much US based now) have an "Industrial model" which allows a better chance of playing the forward market than the traditional oil patch model- in other words unless they are willing to drive prices down to say $ 20 a bbl AND keep them there for years the US shale producers will continue to be the new swing producers
The Economist had an interesting article this week - the legacy oil producers are being stuffed as shale oil/gas (very much US based now) have an "Industrial model" which allows a better chance of playing the forward market than the traditional oil patch model- in other words unless they are willing to drive prices down to say $ 20 a bbl AND keep them there for years the US shale producers will continue to be the new swing producers
Indeed, the US producers are now able to extract oil and gas at a far lower cost than three years ago, so what were relatively expensive field could be brought back on line. Add into this a rationalisation of the companies with the small ones being swallowed by the bigger ones.
https://seekingalpha.com/article/407...on-levels-soon
https://www.ft.com/content/c2cbc180-...0-1ce02ef0def9
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Know thy enemy The markets frustrate OPEC’s efforts to push up oil prices
The cartel is fighting not just shale producers but the futures market
May 18th 2017
BORROWING three words from Mario Draghi, the central banker who helped save the euro zone, Khalid al-Falih, Saudi Arabia’s energy minister, and his Russian counterpart, Alexander Novak, on May 15th promised to do “whatever it takes” to curb the glut in the global oil markets. Ahead of a May 25th meeting of OPEC, the oil producers’ cartel, they promised to extend cuts agreed last year by nine months, to March 2018, pushing oil prices up sharply, to around $50 a barrel. But to make the rally last, a more apt three-word phrase might be: “know thy enemy”.
In two and a half years of flip-flopping over how to deal with tumbling oil prices, OPEC has been consistent in one respect. It has underestimated the ability of shale-oil producers in America—its nemesis in the sheikhs-versus-shale battle—to use more efficient financial techniques to weather the storm of lower prices. A lifeline for American producers has been their ability to use capital markets to raise money, and to use futures and options markets to hedge against perilously low prices by selling future production at prices set by these markets. Only recently has the cartel woken up to the effectiveness of this strategy. It is not clear that it has found the solution.
The most obvious challenge shale producers have posed to OPEC this decade is the use of hydraulic fracturing, or fracking, to drill oil quickly and cheaply in places previously thought uneconomic. Once OPEC woke up to this in 2014, it started to flood the world with oil to drive high-cost competitors out of business (damaging its members’ own fortunes to boot).
But it overlooked a more subtle change. Fracking is a more predictable business than the old wildcatter model of pouring money into holes in the ground, hoping a gusher will generate a huge pay-off. As John Saucer of Mobius Risk Group, an advisory firm, says, shale has made oil production more like a manufacturing business than a high-rolling commodity one.
That has made it easier to secure financing to raise production, enabling producers to spend well in excess of their cashflows. Mr Saucer says the backers of the most efficient shale firms include private-equity and pension-fund investors who demand juicy but reliable returns. They are more likely to hedge production to protect those returns than to gamble on the “home run” of the oil price doubling to $100 a barrel.
“Their hedging is very systematic and transparent,” he says. “They don’t mess around with commodity speculation.”
Data from America’s Commodity Futures Trading Commission, a regulatory body, bear out the shift. They show that energy and other non-financial firms trade the equivalent of more than 1bn barrels-worth of futures contracts in West Texas Intermediate (WTI), more than double the level of five years ago and representing almost a quarter of the market compared with 16% in 2012. Many of these are hedges, though Mr Saucer says the data only reflect part of the total, excluding bilateral deals with big banks and energy merchants.
OPEC and non-OPEC producers unwittingly exacerbated the hedging activity by inflating output late last year even as they decided to cut production from January 1st. The conflicting policies helped depress the spot price relative to the price of WTI futures, preserving an upwardly sloping futures curve known as “contango”. This made it more attractive for shale producers to sell forward their future production, enabling them to raise output.
That higher shale output will persist is borne out by a surge in the number of drilling rigs, which shows no signs of ebbing. The Energy Information Administration, an American government agency, reckons that by next year the United States will be producing 10m barrels of oil a day, above its recent high in April 2015. That would put it on a par with Russia and Saudi Arabia. Shale producers will have gained market share at their expense.
In response, the frustrated interventionists appear now to have set out to put the futures curve into “backwardation”, in which short-term prices are higher than long-term ones. The aim is to discourage the stockpiling of crude, as well as the habit of hedging. But success is not guaranteed.
The International Energy Agency, a forecasting body, said this week that, even if the OPEC/non-OPEC cuts are formally extended on May 25th, more work would need to be done in the second half of this year to cut inventories of crude to their five-year average, which is the stated goal of Messrs al-Falih and Novak. It also noted that Libya and Nigeria, two OPEC members not subject to the cuts because of difficult domestic circumstances, have sharply raised production recently, perhaps undercutting the efforts of their peers.
Moreover, global demand this year has been weaker than expected. In a report this week, Roland Berger, a consultancy, argued that rich-country oil demand has peaked, and that, as developing countries such as China and India industrialise, they will use oil more efficiently than did their developed-world counterparts (see chart). All this raises doubts about how far the oil price can climb.
Eventually, shale producers will have their comeuppance. Labour and equipment shortages will push up drilling costs. Higher interest rates will dampen investor enthusiasm. “Irrational exuberance” may lead them to produce so much that prices collapse. But for now, Saudi Arabia seems to be leading OPEC into a war it cannot win. As Pierre Lacaze, of LCMCommodities, a research firm, memorably puts it, it has taken “a knife to a gunfight”. Worse, it has wounded mostly itself.
The cartel is fighting not just shale producers but the futures market
May 18th 2017
BORROWING three words from Mario Draghi, the central banker who helped save the euro zone, Khalid al-Falih, Saudi Arabia’s energy minister, and his Russian counterpart, Alexander Novak, on May 15th promised to do “whatever it takes” to curb the glut in the global oil markets. Ahead of a May 25th meeting of OPEC, the oil producers’ cartel, they promised to extend cuts agreed last year by nine months, to March 2018, pushing oil prices up sharply, to around $50 a barrel. But to make the rally last, a more apt three-word phrase might be: “know thy enemy”.
In two and a half years of flip-flopping over how to deal with tumbling oil prices, OPEC has been consistent in one respect. It has underestimated the ability of shale-oil producers in America—its nemesis in the sheikhs-versus-shale battle—to use more efficient financial techniques to weather the storm of lower prices. A lifeline for American producers has been their ability to use capital markets to raise money, and to use futures and options markets to hedge against perilously low prices by selling future production at prices set by these markets. Only recently has the cartel woken up to the effectiveness of this strategy. It is not clear that it has found the solution.
The most obvious challenge shale producers have posed to OPEC this decade is the use of hydraulic fracturing, or fracking, to drill oil quickly and cheaply in places previously thought uneconomic. Once OPEC woke up to this in 2014, it started to flood the world with oil to drive high-cost competitors out of business (damaging its members’ own fortunes to boot).
But it overlooked a more subtle change. Fracking is a more predictable business than the old wildcatter model of pouring money into holes in the ground, hoping a gusher will generate a huge pay-off. As John Saucer of Mobius Risk Group, an advisory firm, says, shale has made oil production more like a manufacturing business than a high-rolling commodity one.
That has made it easier to secure financing to raise production, enabling producers to spend well in excess of their cashflows. Mr Saucer says the backers of the most efficient shale firms include private-equity and pension-fund investors who demand juicy but reliable returns. They are more likely to hedge production to protect those returns than to gamble on the “home run” of the oil price doubling to $100 a barrel.
“Their hedging is very systematic and transparent,” he says. “They don’t mess around with commodity speculation.”
Data from America’s Commodity Futures Trading Commission, a regulatory body, bear out the shift. They show that energy and other non-financial firms trade the equivalent of more than 1bn barrels-worth of futures contracts in West Texas Intermediate (WTI), more than double the level of five years ago and representing almost a quarter of the market compared with 16% in 2012. Many of these are hedges, though Mr Saucer says the data only reflect part of the total, excluding bilateral deals with big banks and energy merchants.
OPEC and non-OPEC producers unwittingly exacerbated the hedging activity by inflating output late last year even as they decided to cut production from January 1st. The conflicting policies helped depress the spot price relative to the price of WTI futures, preserving an upwardly sloping futures curve known as “contango”. This made it more attractive for shale producers to sell forward their future production, enabling them to raise output.
That higher shale output will persist is borne out by a surge in the number of drilling rigs, which shows no signs of ebbing. The Energy Information Administration, an American government agency, reckons that by next year the United States will be producing 10m barrels of oil a day, above its recent high in April 2015. That would put it on a par with Russia and Saudi Arabia. Shale producers will have gained market share at their expense.
In response, the frustrated interventionists appear now to have set out to put the futures curve into “backwardation”, in which short-term prices are higher than long-term ones. The aim is to discourage the stockpiling of crude, as well as the habit of hedging. But success is not guaranteed.
The International Energy Agency, a forecasting body, said this week that, even if the OPEC/non-OPEC cuts are formally extended on May 25th, more work would need to be done in the second half of this year to cut inventories of crude to their five-year average, which is the stated goal of Messrs al-Falih and Novak. It also noted that Libya and Nigeria, two OPEC members not subject to the cuts because of difficult domestic circumstances, have sharply raised production recently, perhaps undercutting the efforts of their peers.
Moreover, global demand this year has been weaker than expected. In a report this week, Roland Berger, a consultancy, argued that rich-country oil demand has peaked, and that, as developing countries such as China and India industrialise, they will use oil more efficiently than did their developed-world counterparts (see chart). All this raises doubts about how far the oil price can climb.
Eventually, shale producers will have their comeuppance. Labour and equipment shortages will push up drilling costs. Higher interest rates will dampen investor enthusiasm. “Irrational exuberance” may lead them to produce so much that prices collapse. But for now, Saudi Arabia seems to be leading OPEC into a war it cannot win. As Pierre Lacaze, of LCMCommodities, a research firm, memorably puts it, it has taken “a knife to a gunfight”. Worse, it has wounded mostly itself.
I am probably regarded as well informed and well read but I need help with this one. So would someone refresh me as to why the Iranian elected government is 'bad' whilst the Saudi dictatorship is 'good'?
Just want to know we are on the right side and wearing the correct colour of hat.
Just want to know we are on the right side and wearing the correct colour of hat.
I am probably regarded as well informed and well read but I need help with this one. So would someone refresh me as to why the Iranian elected government is 'bad' whilst the Saudi dictatorship is 'good'?
Just want to know we are on the right side and wearing the correct colour of hat.
Just want to know we are on the right side and wearing the correct colour of hat.
@JustThisOnce
Using the terms "bad" and "Good" is your first mistake in comprehension of the politics involved. "Useful" and "not currently in a pissing contest with one another" are more apt terms. Bottom line comes from the following adage: nations have interests more than friends. There are some unusual variations on that, but it is a useful lens through which to look at political choices.
Using the terms "bad" and "Good" is your first mistake in comprehension of the politics involved. "Useful" and "not currently in a pissing contest with one another" are more apt terms. Bottom line comes from the following adage: nations have interests more than friends. There are some unusual variations on that, but it is a useful lens through which to look at political choices.
Clementine Churchill: "General, you must not hate your friends more than you hate your enemies"; De Gaulle (in English): "France has no friends, only interests."
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The world is not really dependent on Iran for anything - Saudi on the other hand IS important to us - therefore it is in our interests to defend the status quo
Iran kicked out Western oil companies (twice!) - Saudi is hand in glove with them
Simple practical politics TBH
Iran kicked out Western oil companies (twice!) - Saudi is hand in glove with them
Simple practical politics TBH
I'm not sure why we depend on Saudi for anything. Even their prominent role in oil production is not what is was and the trend is down, along with human rights et al. Beheadings, floggings and oppression are all trending up
Iran has oil, is relatively cash rich but short on overseas investment after years of pre-nuclear treaty sanctions. For those that think in dollars the military equipment in Iran could do with a refresh, along with major infrastructure.
Iran has oil, is relatively cash rich but short on overseas investment after years of pre-nuclear treaty sanctions. For those that think in dollars the military equipment in Iran could do with a refresh, along with major infrastructure.
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Ah - but Saudi has oil for export - in very large quantities - Iran does export but is using more and more itself - it'll finish up like Indonesia which exports relatively little these days.
Plus the Saudis are sitting on enormous reserves
Without Saudi oil the Russians would be the swing producer............. not something to look forward to
Plus the Saudis are sitting on enormous reserves
Without Saudi oil the Russians would be the swing producer............. not something to look forward to
In two and a half years of flip-flopping over how to deal with tumbling oil prices, OPEC has been consistent in one respect. It has underestimated the ability of shale-oil producers in America—its nemesis in the sheikhs-versus-shale battle—to use more efficient financial techniques to weather the storm of lower prices. A lifeline for American producers has been their ability to use capital markets to raise money, and to use futures and options markets to hedge against perilously low prices by selling future production at prices set by these markets. Only recently has the cartel woken up to the effectiveness of this strategy. It is not clear that it has found the solution.
Ecce Homo! Loquitur...
Thread Starter
Kicking off all over the Gulf. If Saudi are concentrating on Qatar they'd better watch their flank.....
12 dead as Isis terrorists attack Iranian parliament and Ayatollah’s shrine
Islamic State claimed responsibility today for an assault on the heart of the Iranian Islamic republic, in which attackers killed 12 people as they stormed the national parliament and the shrine of the late supreme leader, Ayatollah Ruhollah Khomeini.
Security guards, members of the Revolutionary Guard and a gardener at the shrine were among those killed. The assailants, some dressed in the flowing black chador robes of Iranian women, were shot dead or blew themselves up, according to initial reports. That was only after some managed to enter the parliament’s administrative building, roaming the corridors and shooting people. Dramatic pictures showed workers and in some cases children, probably brought in to work by parents because of the Ramadan and summer holiday season, being lowered to the ground through open windows to escape.
Isis released a video on one of its affiliated news agencies, Amaq, apparently filmed by the attackers inside the parliament building. “Do you think we will leave? We will remain, God willing,” a voice is heard saying. “We will remain” is an Isis slogan, but has taken on a new significance as the group faces the loss of its territories in Iraq and Syria to a combination of US-backed groups, Iraqi and Syrian regime forces, and Iranian-backed militias.
Iran’s Revolutionary Guard, however, immediately accused Saudi Arabia of being behind the attack.
Last month, the kingdom’s deputy crown prince, Mohammed bin Salman, warned that Iran was trying to take over the Middle East and threatened to take direct action. “We will not wait until the battle is in Saudi Arabia, but we will work so the battle is there in Iran,” he said. That was followed by a summit in Riyadh attended by President Trump in which Sunni Muslim nations heard calls to take on “Iran-backed terrorism”.
In a statement promising revenge, the Revolutionary Guard said: “This terrorist attack happened only a week after the meeting between the US president and the backward leaders who support terrorists. The fact that Islamic State has claimed responsibility proves that they were involved in the brutal attack.”
The attacks began mid-morning and were clearly co-ordinated. Four men assaulted the heavily protected parliament complex, killing four of the guards and injuring 25 other people immediately. A fifth person died later in hospital. The attackers then managed to enter the building, firing pistols and rifles and taking hostages, killing a further two members of the Revolutionary Guard and three others. One man came back out and started firing into the street, but was forced back inside by police. It took several hours before police and the Guard managed to control the situation, shooting all four attackers dead.
The Fars news agency said “three or four” other insurgents had attacked the mausoleum of Ayatollah Khomeini, the firebrand anti-western cleric brought to power by the 1979 revolution, who died in 1989.They opened fire, killing a gardener and one other and injuring a number of bystanders. One of the attackers, who was dressed as a woman, then triggered a suicide explosive vest. Photographs showed a large yellow flash outside the building.
Abdolrahman Fazli, the interior minister, said the country’s security council, which is headed by President Rouhani, had been summoned.
The attack outside on the crowd of onlookers suggested a sectarian element to the action. Isis promotes Sunni extremism, regarding Shia Muslims, the majority in Iran, as apostates. Al-Qaeda has rarely if ever carried out attacks against the Islamic Republic, a fact put down by many to the number of its members who fled to Iran from neighbouring Afghanistan in 2001, and remained there either at semi-liberty or under house arrest. The last major terrorist incident in Iran was a 2010 bomb attack on a mosque in Balochistan in the southeast of the country by a breakaway radical Sunni group, Jundullah.
There have been no attacks by Isis, which broke off from al-Qaeda in 2013 following a dispute over leadership of the group’s faction in the Syrian conflict. However, in March it issued a Persian-language video saying it was time to conquer the country and bring it within the Sunni fold.
12 dead as Isis terrorists attack Iranian parliament and Ayatollah’s shrine
Islamic State claimed responsibility today for an assault on the heart of the Iranian Islamic republic, in which attackers killed 12 people as they stormed the national parliament and the shrine of the late supreme leader, Ayatollah Ruhollah Khomeini.
Security guards, members of the Revolutionary Guard and a gardener at the shrine were among those killed. The assailants, some dressed in the flowing black chador robes of Iranian women, were shot dead or blew themselves up, according to initial reports. That was only after some managed to enter the parliament’s administrative building, roaming the corridors and shooting people. Dramatic pictures showed workers and in some cases children, probably brought in to work by parents because of the Ramadan and summer holiday season, being lowered to the ground through open windows to escape.
Isis released a video on one of its affiliated news agencies, Amaq, apparently filmed by the attackers inside the parliament building. “Do you think we will leave? We will remain, God willing,” a voice is heard saying. “We will remain” is an Isis slogan, but has taken on a new significance as the group faces the loss of its territories in Iraq and Syria to a combination of US-backed groups, Iraqi and Syrian regime forces, and Iranian-backed militias.
Iran’s Revolutionary Guard, however, immediately accused Saudi Arabia of being behind the attack.
Last month, the kingdom’s deputy crown prince, Mohammed bin Salman, warned that Iran was trying to take over the Middle East and threatened to take direct action. “We will not wait until the battle is in Saudi Arabia, but we will work so the battle is there in Iran,” he said. That was followed by a summit in Riyadh attended by President Trump in which Sunni Muslim nations heard calls to take on “Iran-backed terrorism”.
In a statement promising revenge, the Revolutionary Guard said: “This terrorist attack happened only a week after the meeting between the US president and the backward leaders who support terrorists. The fact that Islamic State has claimed responsibility proves that they were involved in the brutal attack.”
The attacks began mid-morning and were clearly co-ordinated. Four men assaulted the heavily protected parliament complex, killing four of the guards and injuring 25 other people immediately. A fifth person died later in hospital. The attackers then managed to enter the building, firing pistols and rifles and taking hostages, killing a further two members of the Revolutionary Guard and three others. One man came back out and started firing into the street, but was forced back inside by police. It took several hours before police and the Guard managed to control the situation, shooting all four attackers dead.
The Fars news agency said “three or four” other insurgents had attacked the mausoleum of Ayatollah Khomeini, the firebrand anti-western cleric brought to power by the 1979 revolution, who died in 1989.They opened fire, killing a gardener and one other and injuring a number of bystanders. One of the attackers, who was dressed as a woman, then triggered a suicide explosive vest. Photographs showed a large yellow flash outside the building.
Abdolrahman Fazli, the interior minister, said the country’s security council, which is headed by President Rouhani, had been summoned.
The attack outside on the crowd of onlookers suggested a sectarian element to the action. Isis promotes Sunni extremism, regarding Shia Muslims, the majority in Iran, as apostates. Al-Qaeda has rarely if ever carried out attacks against the Islamic Republic, a fact put down by many to the number of its members who fled to Iran from neighbouring Afghanistan in 2001, and remained there either at semi-liberty or under house arrest. The last major terrorist incident in Iran was a 2010 bomb attack on a mosque in Balochistan in the southeast of the country by a breakaway radical Sunni group, Jundullah.
There have been no attacks by Isis, which broke off from al-Qaeda in 2013 following a dispute over leadership of the group’s faction in the Syrian conflict. However, in March it issued a Persian-language video saying it was time to conquer the country and bring it within the Sunni fold.
24 Hour Ultimatum! Saudi Arabia threatens Qatar to submit to list of demands or face war
https://theduran.com/24-hour-ultimat...else-face-war/
Turkish parliament approves troop deployment in Qatar
Turkish parliament approves troop deployment in Qatar | Qatar News | Al Jazeera
(Excuse the crude text/links, I am non too adept with my iPad Mini!)
https://theduran.com/24-hour-ultimat...else-face-war/
Turkish parliament approves troop deployment in Qatar
Turkish parliament approves troop deployment in Qatar | Qatar News | Al Jazeera
(Excuse the crude text/links, I am non too adept with my iPad Mini!)
Now that's interesting: how are the Turks going to get their troops to Qatar?
We do indeed live in interesting times.
We do indeed live in interesting times.
