Re:U.S. oil production to be equal to Russia plus Saudi Arab...
by adventured on Friday December 21, 2018 @01:45PM
(#18735499)
> Most new US production is higher cost (fracking), so the drop in market share is at least met with a stronger price floor for all.
The price floor problem for Russia and Saudi is societal and governmental financial, rather than raw production cost based.
Saudi Arabia now needs ~$95 oil to balance its budget for 2019. That has persistently been moving higher for them. So they're stuck in a death trap on price, where they're one of the few producers that can cut substantially to lift prices which the US producers constantly push down on. So they lose share to the US producers just to try to stay alive on price. Meanwhile it costs ever more money to placate the people of Saudi Arabia (and their population is growing rapidly, tripling since ~1982; a problem Russia of course doesn't have, with a stable population figure). Eventually that formula explodes, something will give in the coming decade.
Russia is in better shape on the price they need. They're a lot more comfortable near $60 than the Saudis. However they're still not able to realistically sustain oil prices lower than what the $40-$50 Permian producers can manage (seeing as the US producers don't have a national budget to support or a social bribe to pay for stability).
The price floor problem for Russia and Saudi is societal and governmental financial, rather than raw production cost based.
Saudi Arabia now needs ~$95 oil to balance its budget for 2019. That has persistently been moving higher for them. So they're stuck in a death trap on price, where they're one of the few producers that can cut substantially to lift prices which the US producers constantly push down on. So they lose share to the US producers just to try to stay alive on price. Meanwhile it costs ever more money to placate the people of Saudi Arabia (and their population is growing rapidly, tripling since ~1982; a problem Russia of course doesn't have, with a stable population figure). Eventually that formula explodes, something will give in the coming decade.
Russia is in better shape on the price they need. They're a lot more comfortable near $60 than the Saudis. However they're still not able to realistically sustain oil prices lower than what the $40-$50 Permian producers can manage (seeing as the US producers don't have a national budget to support or a social bribe to pay for stability).