What's the likelihood that they'll actually freeze production?The current rally doesn't make sense to me.
1) Saudi issuing sovereign debt for cash flow, so what do they care. Why would they give up market share?
2) USD at 12 year high, so today's bbl is actually worth more than $50 based on USD pre-Trump.
3) Iran is nowhere near pre sanction output levels and will continue to fight with saudi for European market share.
4) high usd means more rubles for Russia to finance fiscal responsibilities. Therefore prices/bbl don't need to be that high to finance same levels of gov spending.
5) breakevens are ~50$ or less for US shale. With trump in power, I'm sure the conditions will be there for breakevens to decrease even further. Rig counts are guaranteed to jump when prices go up.
Am I underestimating the fiscal strain experienced by petrocountries? Regardless, the price ceiling is us shale breakeven costs due to being the swing producer and the binary ON/OFF nature of shale rigs.
Am I wrong?
Submitted November 21, 2016 at 02:28PM by Wonka_Raskolnikov http://ift.tt/2fkVmLL
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