From Art Berman's blog:
Saudi
Arabia is not trying to crush U.S. shale plays. Its oil-price war is
with the investment banks and the stupid money they directed to fund the
plays. It is also with the zero-interest rate economic conditions that
made this possible.
Saudi Arabia intends to keep oil prices low for as long as possible. Its oil production increased to 10.3 million barrels per day
in March 2015. That is 700,000 barrels per day more than in December
2014 and the highest level since the Joint Organizations Data Initiative
began compiling production data in 2002 (Figure 1 below). And Saudi
Arabia’s rig count has never been higher.
Figure 1.
Saudi Arabian crude oil production and Brent crude oil price in 2015
U.S. dollars. Source: U.S. Bureau of Labor Statistics, EIA and Labyrinth
Consulting Services, Inc.
Market share is an important part of the motive but Saudi Minister of Petroleum and Mineral Resources Ali al-Naimi recently emphasized
that “The challenge is to restore the supply-demand balance and reach
price stability.” Saudi Arabia’s need for market share and long-term demand is best met with a growing global economy and lower oil prices.
That
means ending the over-production from tight oil and other expensive
plays (oil sands and ultra-deep water) and reviving global demand by
keeping oil prices low for some extended period of time. Demand has been
weak since the run-up in debt and oil prices that culminated in the
Financial Collapse of 2008 (Figure 2 below).
Figure
2. World liquids demand (consumption) as a percent of supply
(production) and WTI crude oil price adjusted using the consumer price
index (CPI) to real February 2015 U.S. dollars, 2003-2015. Source: EIA,
U.S. Bureau of Labor Statistics, and Labyrinth Consulting Services, Inc.
(click to enlarge image)
Since
2008, the U.S. Federal Reserve Board and the central banks of other
countries have further increased debt, devalued their currencies and
kept interest rates at the lowest sustained levels ever (Figure 3
below). These measures have not resulted in economic recovery and have
helped produce the highest sustained oil prices
in history. They also led to investments that are not particularly
productive but promise higher yields that can be found otherwise in a
zero-interest rate world....MUCH MORE
Figure 4. Slide from Schlumberger CEO Paal Kibsgaard’s presentation at the Scotia Howard Weil 2015 Energy Conference.
