Saudi Arabia and OPEC are doomed.

[Swordsmyth]

It's not just US shale companies that are forced to retrench as they scramble to survive in a world where the price of their key commodity was just whacked by a third: overnight the world's largest oil producer, Saudi Aramco, announced it will slash planned spending this year in the first sign that plunging demand and the oil-price war which the Saudi unleashed are starting to hit home.
In a statement, Aramco said that its capex budget for 2020 will be cut by almost a third, and will be between $25 billion and $30 billion in 2020 as spending plans for next year and beyond are being reviewed. Prior to the cut, Aramco had expected a planned capex in the range of $35 billion to $40 billion per its IPO prospectus, and compares with $32.8 billion in 2019.

The capex cut comes as Aramco's profit tumbles 21% in lower oil prices and production. Of course, the worst is yet to come as none of the numbers below capture the historic crash in the price of oil which is the primary driver behind the company's revenue and profits:

• Net income including minority interests: 331 billion riyals ($88 billion) vs 417 billion in 2018
• Revenue: 1.11 trillion riyals vs 1.19 trillion riyals
• Operating profit: 675 billion riyals vs 798 billion riyals

"We have already taken steps to rationalize our planned 2020 capital spending,” Aramco CEO Amin Nasser said. Given the impact of the coronavirus pandemic on economic growth and demand, Aramco is adopting “a flexible approach to capital allocation."
"That was the surprise,” Ahmed EFG Hermes analyst Hazem Maher. "They’re adding production in a low price environment so their cash flows could be impacted." Cutting investment could help absorb some of the impact of the drop in oil prices, but it would also have substantial consequences on the local economy as far fewer people are employed.
The capex cut is just the start. As Bloomberg writes this morning, echoing what we said last weekend, the oil-price war led by Saudi Arabia and Russia will mean more pain for Aramco as producing nations prepare to boost supply. Discounted pricing to markets already reeling from weak demand and crude that lost roughly half its value since the beginning of the year is likely to hit revenue further.
It also means that anyone who bought into the Aramco IPO is ruing the day: the Saudi oil giant's shares fell as much as 0.9% on Sunday, extending the decline this year to about 18%. Aramco’s market value has slumped from a peak of over $2 trillion in December to about $1.5 trillion, and it has much more to drop if the oil price war does not end soon.

What is odd is that Saudi Arabia pledged to supply 25% more oil in April than it produced last month, and Wednesday ordered Aramco to boost output capacity by 1 million barrels a day. However it is not clear how the oil giant will do that if its capex is slashed by $10 billion.


More at: https://www.zerohedge.com/markets/ar...profits-plunge

[Swordsmyth]

Saudi Arabia continues to signal to the market that it is not backing down from the oil price war despite the crumbling oil prices amid coronavirus-hit demand and promises of huge extra supply next month.
Oil giant Saudi Aramco will proceed with the reduction of its refinery rates in Saudi Arabia in April and May in order to free up more crude oil for exports, an official at the company told Reuters on Thursday.
Saudi Arabia will continue to supply a record 12.3 million barrels per day (bpd) to the oil market in the coming months, as per order from the energy ministry, the official Saudi Press Agency reported on Wednesday.
The Kingdom is intent on unleashing growing crude oil volumes on the market, aiming to significantly boost its crude oil exports to a record-breaking more than 10 million bpd in May.
The Saudis, who launched an all-out price war for market share with Russia after Moscow refused to back deeper cuts, will not only boost April exports from the current 7 million bpd, but will also grow exports in May by another 250,000 bpd from April.

More at: https://oilprice.com/Energy/Crude-Oi...ces-Lower.html

[Swordsmyth]

Saudi Arabia said the government will cut spending by 5%, or about $13.3 billion, to offset the impact of plunging oil prices and the effects of the new coronavirus on its economic outlook and deficit.In a statement carried by the state-run Saudi Press Agency late Wednesday, Finance Minister Mohammad Al-Jadaan said additional measures would be taken to deal with the drop in oil prices, but he did not elaborate further.


Al-Jaadan said the government approved a partial reduction in spending in areas “with the least social and economic impact." He did not give specific details on where the spending cuts would happen.
The kingdom, which leads one of the world's 20 biggest economies, relies heavily on government spending to fuel its economy and pay the salaries of most Saudi citizens who work in the public sector.
Saudi Arabia has already announced a roughly $13 billion stimulus package to support the private sector and extend financing to small and medium-sized businesses impacted by the virus, which has affected countries around the world.
The kingdom has halted all commercial flights and closed its borders to travelers to slow down the spread of the virus, which has infected nearly 240 people in the country. The government also ordered most public and private sector employees to work from home for two weeks, and closed schools, universities, restaurants, malls, entertainment venues and even mosques, while keeping food delivery, grocery stores and pharmacies operating.

More at: https://news.yahoo.com/saudi-arabia-...075743587.html

[r3volution 3.0]

I won't pretend to know what's being decided in the inner councils of Riyadh and Moscow, but this should end in tears for US shale, whether that's the plan or not. The only reason shale exists is that high prices justified those relatively expensive extraction methods. The shale patch just about flat-lined back in 2015, but then a bunch of private equity guys came in and bailed them out, which is fine; those guys took their risk, but that also means they need to bear the cost of the impending defaults (not the taxpayer). Of course, this is America, no one is permitted to suffer the consequences of their own stupidity. Oil at 50% of their production cost? No matter, the Fed will buy barrels, and then pay someone else to dump them into a ditch, if need be: because Wall Street loaded up on that $#@!, their bonds.

Interesting times

[Swordsmyth]

I won't pretend to know what's being decided in the inner councils of Riyadh and Moscow, but this should end in tears for US shale, whether that's the plan or not. The only reason shale exists is that high prices justified those relatively expensive extraction methods. The shale patch just about flat-lined back in 2015, but then a bunch of private equity guys came in and bailed them out, which is fine; those guys took their risk, but that also means they need to bear the cost of the impending defaults (not the taxpayer). Of course, this is America, no one is permitted to suffer the consequences of their own stupidity. Oil at 50% of their production cost? No matter, the Fed will buy barrels, and then pay someone else to dump them into a ditch, if need be: because Wall Street loaded up on that $#@!, their bonds.

Interesting times

Now is the perfect time to fill the SPR to the brim.
And we should tariff foreign government oil companies that are waging economic warfare on us to try and make us reliant on them for our needs so they can blackmail us.

[r3volution 3.0]

Now is the perfect time to fill the SPR to the brim.

That cup's about to overfloweth, from what I understand.

Hence the talk about "negative" oil prices, paying someone to carry it elsewhere.

And we should tariff foreign government oil companies that are waging economic warfare on us to try and make us reliant on them for our needs so they can blackmail us.

Nonsense

The Fed is, as we speak, looting the rest of the world, via its exorbitant privilege, to bail out cruise lines, air lines, and everybody else.

This is all financed by a tax on, inter alia, very poor people in the third world.

...who we also periodically bomb.

So, maybe, for a moment, check your national self-righteousness - hang the jingo-jango on the door for a few weeks.

[Warlord]

The shale boom is welll and truly over

https://oilprice.com/Energy/Energy-G...-To-Learn.html

Most of them are relying on a $55-60/barrel price point to break even.

SS should rename the thread.

[r3volution 3.0]

The shale boom is welll and truly over

https://oilprice.com/Energy/Energy-G...-To-Learn.html

Most of them are relying on a $55-60/barrel price point to break even.

SS should rename the thread.

The US is living on a very extended credit line.

It'll last through this crisis, but not the next one.

This'll be the last great American bailout.