There is some chatter about there not being much oil reserves left in SA; though I suspect MBS is merely being cautious for having continued in taking a moderate line with regard to current events in the Middle East.
Watch and wait is certainly the right approach; and Pilkington remains perhaps my favourite columnist on UH so far, for being cool and reasoned in his analysis( and refreshingly dispassionate in this day and age of hyper- emotion).
Agreed. I think he’s underrated on economic issues.
Alex Carnegie
6 months ago
I agree that one should always focus on what the Saudis are doing but that merely begs another question: what drives their long term thinking? My long term model has been for many years:
1/ SA runs a match sloppier oil cartel than De Beers does with diamonds. It is relaxed about prices considerably varying within a range. It does, however, have a target price in mind which may have been $60-75 until recently.
2/ Periodically, OPEC discipline slips and SA then lets prices fall to below $50 – or below $10 on one occasion – until the rest of OPEC beg for mercy, reduce overproduction and discipline is restored. Such temporary falls do not represent loss of control but its enforcement.
3/ SA sets its target price at the highest consistent with preventing a runaway increase in non OPEC production. The $60-75 target may have reflected a desire to cap US production which has stopped trending up in the last four years.
The real question is how much impact will net zero have on this strategy which appears to have been in place since the 1980s. My guess is that so far the Saudis are sceptical that oil demand will disappear anytime soon but that at some point they will conclude that they should maximise revenue short term and we can expect $150+. Meanwhile, I am sceptical they are genuinely committed to $100+ today.
Get the feeling there is ” method” in their supposed sloppiness. Reuters and Bloomberg are not always the best in terms of neutral analysis in the shadows of conflicts where MBS is playing it strategic.
Oil prices will shoot as soon as the Chinese and Indian economies guzzle more. Suspect that could be mid 2024 after the latter’s electoral verdicts; and the former’s geo-political strategies cohere( Taiwan etc)
In the meantime SA is pumping in a lot of investment into Indian markets, to hedge against the potential of oil revenues falling in future.
Gerald Arcuri
6 months ago
Having worked in Saudi Arabia, and followed the advice of watching what the Saudis are up to ( which isn’t always apparent ), I’ve learned one thing: Saudi leaders are no fools when it comes to understanding the dynamics of the oil market and will always act in their best interest, which I believe they understand better than any of their foreign interlocutors.
There is some chatter about there not being much oil reserves left in SA; though I suspect MBS is merely being cautious for having continued in taking a moderate line with regard to current events in the Middle East.
Watch and wait is certainly the right approach; and Pilkington remains perhaps my favourite columnist on UH so far, for being cool and reasoned in his analysis( and refreshingly dispassionate in this day and age of hyper- emotion).
Agreed. I think he’s underrated on economic issues.
I agree that one should always focus on what the Saudis are doing but that merely begs another question: what drives their long term thinking? My long term model has been for many years:
1/ SA runs a match sloppier oil cartel than De Beers does with diamonds. It is relaxed about prices considerably varying within a range. It does, however, have a target price in mind which may have been $60-75 until recently.
2/ Periodically, OPEC discipline slips and SA then lets prices fall to below $50 – or below $10 on one occasion – until the rest of OPEC beg for mercy, reduce overproduction and discipline is restored. Such temporary falls do not represent loss of control but its enforcement.
3/ SA sets its target price at the highest consistent with preventing a runaway increase in non OPEC production. The $60-75 target may have reflected a desire to cap US production which has stopped trending up in the last four years.
The real question is how much impact will net zero have on this strategy which appears to have been in place since the 1980s. My guess is that so far the Saudis are sceptical that oil demand will disappear anytime soon but that at some point they will conclude that they should maximise revenue short term and we can expect $150+. Meanwhile, I am sceptical they are genuinely committed to $100+ today.
Get the feeling there is ” method” in their supposed sloppiness. Reuters and Bloomberg are not always the best in terms of neutral analysis in the shadows of conflicts where MBS is playing it strategic.
Oil prices will shoot as soon as the Chinese and Indian economies guzzle more. Suspect that could be mid 2024 after the latter’s electoral verdicts; and the former’s geo-political strategies cohere( Taiwan etc)
In the meantime SA is pumping in a lot of investment into Indian markets, to hedge against the potential of oil revenues falling in future.
Having worked in Saudi Arabia, and followed the advice of watching what the Saudis are up to ( which isn’t always apparent ), I’ve learned one thing: Saudi leaders are no fools when it comes to understanding the dynamics of the oil market and will always act in their best interest, which I believe they understand better than any of their foreign interlocutors.