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Msg  450192 of 468213  at  9/23/2022 1:36:37 AM  by

amstocks82


 In response to msg 450186 by  coolreit
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Re: Saudi cut time; Nigeria approves

Biden emptying the USA SPR is a huge gift to Saudi Arabia!
 
Saudi Arabia has been wanting to cut production, but they have a hard time doing that when prices are too high because in the past, they used high prices as a reason not to cut production. But with the SPR sales, oil prices are low enough that Saudi Arabia can cut production, which they want to do anyway. Then when the SPR oil sales finish, oil prices will go up. Saudi Arabia will wait a few months as the prices increase before deciding if OPEC should increase production again. But by then, oil prices will be higher, and OPEC will be raking in more cash. In the past, if oil prices spiked too high, the USA could open up the SPR and lower prices. But with Biden selling so much oil from the SPR, we won't be able to do that. With the global recession coming, Saudi Arabia can say that the problem is not high oil prices but a recession caused by Covid-19 and the USA inflation. Also, the inflation is another reason that they can say the prices need to be higher.
 
Overall, this will allow Saudi Arabia to set a new higher price level for oil in the future. 
 
In the past, setting a new higher price level would be problematic as Saudi Arabia would worry about new supply being developed. But Biden and democrats have promised to 'end' fossil fuels and one of the ways that they have given to do that is have high oil prices as well as drilling and lease restrictions. So, USA new production can't happen so easily. New Canadian oil production can't be exported very easily as they don't have the pipelines. Another worry in the past would be Venezuela with their massive oil reserves. But with the crime and corruption in Venezuela and the loss of just about the entire professional class of workers in Venezuela (they either have left, starved or became beggars), what can happen with Venezuela? Venezuela can't even get foreign companies to develop their oil with their current leaders - no one would trust them to abide by any contract. 
 
It appears that Saudi Arabia and other members of OPEC and Russia of course will be able to 'gracefully' accept a new higher oil price floor for the foreseeable future. The elites in oil exporting countries can only thank selected USA/Canada/European politicians. 
 
 
 
 
 
 
 


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