Saudi Arabia to lower oil prices, the houston boom is over

You didn't show me who started accepting low offers first on the futures market starting the price panic.

Yeah I don't know enough to start a good conspiracy. It's just weird that people will accept plunging prices for a finite commodity when they could just slow down the pumps, not people that have to have cash flow to pay the bills, but the people with 100 billion in the bank.

 

Eagle Ford Shale East breaks even at $35, West at about $48. This takes a big hit to Texas' severance tax revenue, but could also mean more people on the road, ie more in gas taxes.

Fracking in other parts of the country are much costlier, it will certainly harm them.

 

your breakeven numbers are for existing sites, not new sites, right?

 

Also don't forget the very strong dollar. I think that is the wildcard you are looking for and not the Saudis.

 

Who are the people with 100 billion in the bank ? The Saudis ? They said they didn't want to do that. They can accept less profit now and wait out the little guys. Once those guys go out of business, the Saudis will be in the money again.

 

It's a combination of all those things but the Saudis definitely play a role whether you consider it implicit or not. They've been the security net of the production side for years and they willingly chose not to play the part when the market obviously thought they would.

IMO it's very easy to believe that the Saudis and US are at least partially in cahoots once the price started falling - crashing oil prices directly effect some of our biggest enemies that need to be brought in line (Russians and ISIS to the greatest extent but also Iran and Venezuela). A prolonged period of depressed prices in the $50-$60 range would bring those nations to their knees and in Iran and Russia's case to the negotiating tables.

So I think this rides out for awhile, we see some attrition domestically but the Saudis cutting production around the same time US supply starts declining mid 2015 then we jump back to the $70-$80 range by years end.

 

May be a good time to buy a house in Houston next year...

 

I think Dubious makes a point... I think you do too.

Four things are now affecting the picture. Demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to other fuels. Second, turmoil in Iraq and Libya—two big oil producers with nearly 4m barrels a day combined—has not affected their output. The market is more sanguine about geopolitical risk. Thirdly, America has become the world’s largest oil producer. Though it does not export crude oil, it now imports much less, creating a lot of spare supply. Finally, the Saudis and their Gulf allies have decided not to sacrifice their own market share to restore the price. They could curb production sharply, but the main benefits would go to countries they detest such as Iran and Russia. Saudi Arabia can tolerate lower oil prices quite easily. It has $900 billion in reserves. Its own oil costs very little (around $5-6 per barrel) to get out of the ground.
http://www.economist.com/blogs/economist-explains/2014/12/economist-explains-4

Saudi seems to be taking advantage of a situation to me. I think China's and India's activities may have something to do with this as well.

 

Less profit for the Saudis would still be a lot of money. They could sale at $12 a barrel and still be rolling in cash and kick some folks in the nuts in the process.

 

planning to buy a houston house in 2015 before rates go back up

 

Use a credit union. I just got a 5/5 ARM jumbo loan from UFCU in Austin. It's based off the 10 year treasury. It starts at 2.5% for the first 5 years. After that 5 year period the most it can go up by is 2%. Over the 30 year life of the loan the most it can go up to is 7.5%. It was a no brainer.

Credit unions destroy big banks.

 

This seems to have coincided with the peak in the monetary base. I wonder if a banks began selling off their bets when they saw this. They probably thought "the end of QE3 is near". What'll be fun is to see the Fed raise its Fed Fund rate next year.

 

Same here...though I'm planning to buy in The Woodlands so I don't know if prices will be affected here as much. Really, I'm just hoping things flatten out some and maybe some houses stay on the market s little longer than they have been. Makes negotiating s little easier. Plus, we won't be looking to mp buy until the fall which could help some.

 

Damn. That's pretty sweet.

 

but Citi gave me a fixed rate of 2.875%

 

I heard a good conspiracy story yesterday from a relative who is hooked up with some pretty big wigs: Yes the Saudi's are behind the oil price drop. They are doing it to crash burgeoning US domestic production because, if the US becomes energy independent, the Saudi's will loose their leverage to influence US government, who would drop them like a rock if they could. They want to restore discipline and order to the world oil markets and political relationships. They are more afraid of losing the US military alliance than they are of losing money.

You could write a pretty good Tom Clancy book from that... US moves on from Saudi oil, Saudi's get exposed as supporters of radical Islam and lose favor and military support from the US, Iran supports a revolt within the kingdom, Iran/Saudi, Sunni/Shia all war erupts...
maybe Jack Ryan saves a young Saudi prince that support democratic reforms or prevents the revolutionary guard from using the secret nuke they developed with the Russians.

 

Wow that's great too. Was it a jumbo loan?

 

I like it :grin: Where do the nukes come into play?

 

Long winded rant.

The Saudis rejected a chance to be apart of the UN Security Council. They were rather blunt with their disappointment that the US had not and would not launch a full-scale invasion of Syria. Though, my gut feeling tells me the Sauds (the family) would rather deal with the US than China or some convoluted pretend-state like the EU.

The Iraq war has essentially been a mission to protect the Sauds, not the US. George H W Bush could not tolerate the threat Saddam posed to Saudi Arabia after his invasion of Kuwait. Since then the US has poured massive resources into defending this totalitarian and rather immoral family (I'm talking about both the Saud and Bush family, bazing!).

What strikes me as ironic is Fox News' incessant argument for more military support in the Middle East. Don't the Sauds own a stake in News Corp? It's almost as if the Sauds are delibrately manipulating Americans into doing their bidding under the guise of 'freedom'.

While Saddam tortured and murdered his people, the Sauds do likewise. The moral imperative addressed by George W Bush to attack Iraq was in conflict with the Sauds' own behavior. As W made the case for war, and made the case that Saddam was a butcher, Idi Amin, the butcher of Uganda, was living in luxury in Saudi Arabia. Didn't anyone stop to think "can't W ask our 'ally' to hand over this 'butcher'".

That being said, the sooner the US can "drop" the Sauds, the better. But that won't be happening anytime soon.

 

In the plot line of our book: The Russians sell nukes to Iran to use on the Saudi's and their oilfields. For the Iranians, it's to achieve regional superiority in the Sunni/Shia conflict, for Russia it renders them the world's leader in oil exports in one act. They go from a dying backwater to the richest country on Earth.

But of course, Jack Ryan III hear's of the plot through the grandson of a Russian General who owed his life to the original Jack Ryan, Ding Chavez III infiltrates the Iranian air base by speaking perfect Farsi and the help of a young Iranian democratic revolutionary (whom he later marries) and installs Stuxnet III into the Iranian command and control computer, that changes the targeting data by one digit and the rockets narrowly miss, falling into the Red Sea.