Posted on 11/05/2015 6:44:18 AM PST by Trumpinator
Russian Oil Output Hits Post-Soviet High, Bests Saudi Arabia
November 03, 2015
Russian oil production rose to a post-Soviet record of 10.78 million barrels a day last month, besting Saudi Arabia's output of 10.1 million and contributing to a renewed slump in oil prices.
The increase in production reported November 2 reflects Russia's strategy of defending its market share as the Saudis and other rivals from the Gulf have started offering alternative supplies to Moscow's traditional markets.
Russian production has withstood a collapse in oil prices and a global supply glut, while output by contrast has plummeted 5 percent since peaking in the United States, where low prices have forced oil drillers to slash production and jobs.
Analysts say Russian oil companies are cushioned by oil-extraction and export taxes which shrink along with falling prices. The sharply weaker ruble also has reduced their costs.
“Through the tax framework, the government took the brunt of the blow, just as it used to take most of the windfall profits" when oil prices were soaring, said Artem Konchin, analyst at Otkritie Capital in Moscow.
Russia's output surge helped spur another drop in premium crude prices to $48.79 in London on November 2. Based on reporting by Bloomberg, Reuters, AFP, and TASS
That would be impressive if the Russians weren’t losing money on every barrel of oil drilled given today’s market and their high cost of production. Unfortunately for them, there’s a glut of oil on the market and they’re screwed as a result.
Bump
See Stalingrad where they lost more men than the Germans but it was worth it in the end. How much pain can the Gulf states take?
If the Russians decide to undersell and make zero profit off oil....it’s with the intention of destroying Saudi Arabia entirely in the marketplace. The question is....how long would that take?
Keeping prices low also disincentives those alternative but expensive pipeline routes the USA and Western Europe prefer that bypass Russia.
A bunch of Americans are hurt by the drop in oil prices, but the next impact on the economy is overwhelmingly positive. A lot more Americans buy gas than make money selling it. Russia's economy on the other hand is hugely dependent on oil and gas. That's only true in a few places in the US.
More than Russia can. Saudi Arabia has five years of cash reserves. Russia has less than six months'.
That would be a credible threat except Saudi has a lot more money in the bank than Russia has. You've got the problem exactly backward.
But isn’t a fair amount of Saudi money...simply invested in US debt?
The Russians as far as I know....own zero US debt and wouldn’t touch it with a ten-foot pole.
We shall see.
The Saudis are only waiting long enough to see production drop further in other countries outside of Saudi states and Russia (where production has already fallen). The buffer between world production and consumption is less than 2 million barrels and closing. World consumption continues to increase (mostly in China and India—new drivers, etc.), while world production continues to decrease. That’s the reason for so much chatter (propaganda) from international trade investors for the purpose of keeping oil prices down for the time being.
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