The Saudi’s are clinging to the past.
The days of them being the variable producer are coming to a close. They see that clearly and are completely freaked out by it. This is a desperate guy move.
The thing about desperate guy moves is…they’re desperate. Saudi Arabia is not putting this genie back in the bottle. American oil production is here to stay. Right now there’s a cost average race to the bottom going on, and a big game of chicken being played with cash reserves.
But US production isn’t going to just roll over and die. These people are fighting for their lives and have been largely successful about it.
I am absolutely positive that we will see some domestic US producers collapse. It would be silly to suggest otherwise. But what comes out the other side is a leaner, slimmer, more efficient US oil operation.
OPEC is dead, folks. The US endeavored to put a stake through the heart of that malediction for 40 years. In the last 5, we pulled it off. They are coming apart at the seams and the Saudi’s, as the ring leader for that little circus, are trying to hold it all together.
They’re not going to succeed.
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I’m not sure if OPEC is dead, but I do agree that US production is here to stay. It will be a long term positive if the over levered wildcatters get ran out of business, because they arent drilling for returns, they are drilling to drill. This happened to nat gas drillers a few years ago, and the fat got cut, and what emerged were stronger, leaner, better managed companies. Would make sense that a similar action would occur in the oil patch.
“Stronger leaner better managed”. That must be all the Nat Gas names slowly going to zero? Low bar there.
I’ve heard that some of our guys can make dough at 30 a barrel. Ya we will be
around for a while.
I agree that the game has been changed for the rag heads.
The huge but still nebulous effect of pulling the magic carpet from under the barons of the Mid East remains to be seen.
Will we see increased instability in that region?
Can those countries sustain the social handouts they have built their societies on for the last 4 decades? What happens if they can’t?
Rather…..what happens WHEN they cant’?
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Awesome job! Great read.