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Page added on December 2, 2014
Saudi Arabia warns oil market speculators
Saudi Arabia said on Monday that its oil policy was based on economic principles, as speculation continued to swirl after last week’s OPEC meeting of political motives aimed at other producers. It also warned market speculators.
“The Kingdom’s oil policy is emanating from economic fundamentals, to achieve the economic interests of the Kingdom on the short and long term, and the interests of producers and consumers,” the Council of Ministers said following its weekly meeting.
Riyadh, along with its Gulf OPEC allies, resisted any OPEC output cut at the group’s meeting in Vienna, to maintain the exporting group market share in a battle with non-OPEC and North American producers.
Brent crude oil fell on Monday to a five-year low below $68 as investors looked for a price floor after the OPEC decision not to cut production. A boom in shale oil production and weaker growth in China and Europe have sent prices down by over a third since June.
Despite the steep fall, the Cabinet “expressed satisfaction” with the OPEC decision, which it said “reflects the cohesion of the organization and unity, and foresight, which is something that is of particular importance for the Kingdom,” SPA reported.
The Cabinet, chaired by Crown Prince Salman, deputy premier and minister of defense, called for cooperation against market speculators and said “cooperation of the producers from within and outside OPEC is a shared responsibility to achieve stability.”
The Cabinet eased labor rules for the country’s construction contractors.
The Labor Ministry shall transfer services of workers from a stalled project’s contractor to a new contractor. The transfer charge will be paid by the state. If Saudis are transferred to the new contractor, they should be given wages and benefits not less than those paid by the previous contractor, unless they agree on other terms.
The Cabinet also decided to charge new prices for water sales to government, industrial and commercial sectors, Hajjar said, adding that the new price would be applied after one year and it would not be applied on the residential sector.
The Cabinet also approved new rules and regulations for social care homes. The law stipulates that such homes shall develop a rehabilitation program for men.
Haj Minister and Acting Information Minister Bandar Hajjar said the Cabinet backed the decision taken by the extraordinary meeting of the Arab League Council to discuss ways of supporting the Palestinian cause and its approval of the plan for the Arab movement to end the Israeli occupation of the territories of the State of Palestine, and the plan to submit a draft resolution to UN Security Council to end the occupation.
The Cabinet congratulated Bahrain on the successful parliamentary and municipal councils elections. The meeting was briefed on the results of the GCC Ministerial Council meeting to prepare for the upcoming GCC summit in Doha.
The Cabinet appreciated the efforts of security agencies in fighting drugs and following up drug gangs as well as the coordination between the Customs Department and relevant security authorities in preventing attempts of smuggling drugs into the Kingdom.
The Cabinet authorized the foreign minister to sign an agreement between King Abdulaziz Foundation and the Arab League. It also assigned the foreign minister to discuss with Kyrgyzstan and Cote d’Ivoire to sign an agreement for political consultations with their foreign ministries.
26 Comments on "Saudi Arabia warns oil market speculators"
Plantagenet on Tue, 2nd Dec 2014 11:26 am
I would say that KSA is the tail wagging the dog of the world oil markets, except that Moslems consider dogs to be haram.
Northwest Resident on Tue, 2nd Dec 2014 1:53 pm
So, the “warning” to oil market speculators is that “The Kingdom’s oil policy is emanating from economic fundamentals”.
At first, I had to think about what was the actual “warning” in that statement. But then it became clear. The warning to oil speculators is this: There are sound economic realities behind SA’s decision to not cut production while cutting their price. Stop trying to play the market based on politically-oriented speculations as to why SA has taken the actions it has taken. Embrace reality — demand is decreasing.
Plantagenet on Tue, 2nd Dec 2014 3:09 pm
Actually, demand isn’t decreasing — demand has gone up significantly over the last 10 years.
It is supply that is increasing, thanks to US shale fracking.
Davy on Tue, 2nd Dec 2014 5:48 pm
Planter tell me where those bravo #’s are from 10 years ago where EIA/IEA goal seekers were painting solid production with healthy growth? You should be saying demand didn’t go up like planned. The number indicate a subpar economy. You can say demand increased all you like but not enough to cover the mountains of debt and unfunded liabilities. If I tell my banker I made money but not enough WTF do you think he is going to tell me? Yet, what the bankers and the other thieves do now is extend and pretend. That is all this global economy is one big racket.
Makati1 on Tue, 2nd Dec 2014 6:52 pm
This is not the Asian Century, this is the Century of Chaos. We definitely live in exciting and interesting times. Duck and Cover!
Northwest Resident on Tue, 2nd Dec 2014 7:31 pm
Plant — I have read several articles recently all pointing out exactly how infinitely small that “oil glut” is that you’re crowing about, and demonstrating exactly how absurd it is to blame the recent price plunge on “increasing” supply. But I don’t have time to find them for you, and you wouldn’t read them anyway, so I’ll leave you to your delusions.
TemplarMyst on Tue, 2nd Dec 2014 7:44 pm
Plant,
At a fundamental level I’m not understanding where you’re coming from on all this.
So we have some more oil. Awesome. To me that means we’ve got some more time to get our affairs in order so we can transition off oil. Because every oil field we’ve ever discovered has sooner or later peaked and run dry.
It’s not like we’ve really changed that dynamic at all, so far as I can tell.
So cool, we’ve got some more for a bit. Let’s conserve it and figure out how we’re gonna deal with things when we ain’t finding quite so much, that is, before we find out we ain’t findin’ so much…
Bandits on Tue, 2nd Dec 2014 8:36 pm
SA was producing flat out prior to the price drop and they continue to produce flat out, nothing changed.
The USA increased production with fracking, if the price of oil is so important to the economy The USA should take responsibility, cut back on fracking or stop blending ethanol.
As we all know there appears to be a myriad of different categories of oil including tar sands, condensate, ethanol, heavy, light, tight and so on. What category should bear the burden or should it be shared? The solution appears to be rather complicated to my stupid way of thinking.
Davy on Tue, 2nd Dec 2014 8:52 pm
Bandit, for the U.S. to limit production it would have to take extra ordinary measures. Oil is produced through the free market in the US. You just don’t take control of business without due process. There is something called the rule of law.
Apneaman on Tue, 2nd Dec 2014 9:28 pm
Over the last 10 years there has been almost a billion people added.
2004 6,387,000,000
2014* 7,141,000,000
2004 Oil consumption 82,564.87 bbl/d .
2013, averaging 90.5 million bbl/d.
Are the numbers indicative of a robust growth based global economy?
What role does debt play?
Percentage of income or profits spent on transportation/mining fuels the last decade? Per mile/ton of ore?
Hasn’t the definition of what constitutes a barrel of oil changed?
Same amount of BTU’s?
Are the extraction costs the same?
I think it’s a little more complicated than just counting barrels.
http://www.worldpopulationstatistics.com/population-rankings/world-population-by-year/
http://www.eia.gov/forecasts/steo/report/global_oil.cfm
http://www.indexmundi.com/energy.aspx?product=oil&graph=production+consumption
Bandits on Tue, 2nd Dec 2014 9:32 pm
A free market manipulated with QE. SA doesn’t force the world to buy its oil. But “sanctions” imposed by “free” states have a deleterious affect on world markets, responsibility for which is abrogated as a matter of course. The USA (or anyone for that matter) does not have to purchase SA oil, as you say it’s a free market.
This is a situation with no positive solution. Every state assumes their economic welfare is more important and that somebody else should bear the burden of cuts. It’s human nature plying its trade world wide, and very similar to the non action over climate. change
shortonoil on Wed, 3rd Dec 2014 11:42 am
I think it’s a little more complicated than just counting barrels.
Couldn’t agree more; it is probably the dumbest attempt to inventory the world’s most important commodity ever conceived. Of course, it arose because oil companies sell oil by the barrel, and until fairly recently no one cared much about how useful that barrel really was. Wall Street rated oil companies by reserves, reserves, reserves. The notion that not all barrels are equal, or that their value changes with time never occurred to them. When success is measured only by the next quarterly report, next year’s reality is not considered a problem.
By the way, Reuters just published that last month’s US oil and gas drilling permits fell YoY by 40%. Looks like next year’s reality showed up.
http://www.thehillsgroup.org/
Plantagenet on Wed, 3rd Dec 2014 12:02 pm
@NWT
You constantly amaze me with your total incomprehension about what is happening in the world. I got my latest laugh from your post above where you can’t understand why only a small surplus in oil supplies causes oil prices to go down.
Let me explain it to you.
Its a basic concept in economics that a commodity is priced at the value of the last available bit of the commodity. If there are a lot of low cost suppliers, but a few high priced suppliers are needed to bring the market into balance, the entire commodity is priced at the that higher level. The same principle works in the opposite way—-when there is a surplus the entire commodity tends to be priced at the amount set by the low cost suppliers. So when KSA lowers their oil price (as they did a few weeks ago) the whole market readjusts by lowering their price as well (which happened right after KSA lowered their price).
Get it now?
Cheers!
Northwest Resident on Wed, 3rd Dec 2014 12:22 pm
@NWT — I’m not sure who you are. Probably some figment of Plant’s confused mind. The poor guy is having another “senior moment”. Let it pass.
Plantagenet on Wed, 3rd Dec 2014 12:43 pm
NWR—-the post to NWT was addressed to you. Can’t you even figure that out? Its not very hard to understand— I made a typo—I typed “T” instead of “R”. The two letters are adjacent to each on the keyboard. Get it now?
Why couldn’t you figure that out yourself? Perhaps you were having a senior moment?
OK, please allow me to fix the Typo. Now, lets try again.
@NWR
You constantly amaze me with your total incomprehension about what is happening in the world. I got my latest laugh from your post above where you can’t understand why only a small surplus in oil supplies causes oil prices to go down.
Let me explain it to you.
Its a basic concept in economics that a commodity is priced at the value of the last available bit of the commodity. If there are a lot of low cost suppliers, but a few high priced suppliers are needed to bring the market into balance, the entire commodity is priced at the that higher level. The same principle works in the opposite way—-when there is a surplus the entire commodity tends to be priced at the amount set by the low cost suppliers. So when KSA lowers their oil price (as they did a few weeks ago) the whole market readjusts by lowering their price as well (which happened right after KSA lowered their price).
Comprendo?
Cheers!
Davy on Wed, 3rd Dec 2014 12:44 pm
Planter, come on man, oil is a different animal. I am not going to whiff that brain fart.
Plantagenet on Wed, 3rd Dec 2014 12:52 pm
Davy
You can whiff all the brain farts you like but please keep it to yourself (eeeyyoooo what a metaphor).
Oil is commodity like any other commodity. KSA was losing market share so they started a price war to retain market share. Why is that so hard to understand?
Enjoy the cheap gasoline while it lasts.
Plantagenet on Wed, 3rd Dec 2014 1:17 pm
KSA’s motive for forcing down the price of oil also has something to do with their disapproval of the US rapprochement with Iran, and the Obama’s surrender to Iran’s demands to continue their nuclear program. Or at least thats what the BBC says: http://www.bbc.com/news/world-middle-east-30289546
Apneaman on Wed, 3rd Dec 2014 1:23 pm
Oil is magic.
Oil is the master resource/commodity.
Oil is butter-fried-steak wrapped in bacon. Alternative Energy is lettuce.
http://energyskeptic.com/2014/an-overview/
Northwest Resident on Wed, 3rd Dec 2014 1:24 pm
Investments in oil and gas exploration and production generate substantial economic gains, as well as other benefits such as increased energy independence. The Perryman Group estimates that the industry as a whole generates an economic stimulus of almost $1.2 trillion in gross product each year, as well as more than 9.3 million permanent jobs across the nation. Simply put, this means 9.3 million, or 93% of the 10 million jobs created since the recession/depression trough, are energy related.
But “cheap” oil prices, which put a lot of shale producers out of business, is “good for the US and world economy”, according to our resident oil and world events expert.
If ONLY it were a matter of oversupply. But it is much more complicated than that. I don’t need to explain that set of complicated facts, all of which have been discussed here in depth and over a long period of time. Everybody understands, except of course our resident oil and world events expert, who insists that oil is just another commodity, same as corn, same as iron ore, etc… Except, it isn’t.
Plant, as an example, let’s same some guy who happens to be standing near you takes offense at your ignorantly pompous know-it-all ass-hattery and punches you in the nose, breaking it badly. You fall to the ground, hitting your head so hard that you become brain damaged.
Question: Was it the punch in the nose that caused your brain damage, or was it your subsequent fall to the ground and hitting your head that caused the brain damage?
Now for the analogy. The economy WANTS to grow. It NEEDS to grow. Everybody also wants and needs for the economy to grow because a growing economy is what pays the bills (debt) and gives us all more money and more shiny trinkets from China.
But the price of oil is far too high compared to how much energy is delivered by that oil. Companies and individuals can no longer afford as much of the high priced low-energy oil, so they stop buying it in as great a quantity as before — demand destruction — leading to an “oil glut” because the producers are still pumping away and will continue to do so for some time, which in turn leads to dramatic oil price declines as producers and refineries compete to sell their growing supply of oil to people who can’t afford it at higher prices.
The high price of oil is the punch in the nose. The demand destruction is the fall. And the dramatically lowering oil price is the brain-damaging knock on the head.
Your premise that falling oil prices are due simply to oversupply is simplistic, irrational, faulty and non-inclusive of very real facts.
BTW, this explanation is for other readers who are actually trying to figure out what is going on. This concept has been explained on this forum numerous times, and you still don’t get it, and you’ll never get it. You will persist with your Walter Mitty-like illusions of knowing it all and being some kind of oil business expert, when you are really just a dim-witted egomaniac posing as a serious thinker.
Go ahead, insult me and other posters on this forum some more. That is the only thing you’re half way decent at. Do what you do, Plant.
MSN Fanboy on Wed, 3rd Dec 2014 1:30 pm
LOL
PLANT V NWR & Davy, arguing over the tableware while the house is on fire.
Fun to watch
Northwest Resident on Wed, 3rd Dec 2014 1:43 pm
MSN — Glad you’re amused. Everybody likes to see a pompous know-it-all troll who revels in his own ignorance get a severe intellectual beating, and when it comes to Plant, I’m happy to dish it out. Stay tuned for more fact-filled doomer fun coming your way soon. In the next episode, Plant will accuse me of being ignorant of oil related topics, followed by Plant making statements which prove beyond any doubt that he/she/it is ignorant of oil related topics, and then a special edition featuring a severe intellectual and fact-filled public whipping of Plant for being such a complete ignoramus. Oh, wait, that’s a rerun…
Davy on Wed, 3rd Dec 2014 1:55 pm
Planter, while no doubt some of you brain whiff forces are at work, oil is a central, vital, and global commodity. It is not a bushel of corn. Your Econ 101 is lazy brain corn porn I see routinely from the other Econ 101 specialists Marm & NOo. Planter just when I think you are coming around you drift back into you old corn porn ways. Snap out of it friend.
Plantagenet on Wed, 3rd Dec 2014 3:55 pm
Daver
(1) You are right that oil is not a bushel of corn, but it is nonetheless a commodity.
(2) I have no idea what you talking about with “corn porn”. Thats a variety of human sexuality I have absolutely no interest in.
(3) I enjoy your posts—-you are one smart dude.
Cheers!
Davy on Wed, 3rd Dec 2014 5:21 pm
AaH, Planter, thanks man, but your goin to make NR jealous being complimentative.
I use some weird Daver talk. Corn porn is cornucopian pornography if you can picture that. It is basically dirty and raw BAU optimism often engaged in without protection.
Planter, I like your definition of commodity pricing above but I am just pointing out in a fun way oil is like no other commodity in its special nature. So my point is your point, though accurate, it must include the time and market circumstances. Currently I see the oil market being affected by multiple influences. Currently the market is all over the place with influences that just so happen to be adding up negative.
Northwest Resident on Wed, 3rd Dec 2014 6:40 pm
Davy — That was a giant ass kiss that you got with a smacking sound so loud that it reverberated around the world! Hope it wasn’t a wet one!