new York The low oil price is now also calling on the US President. According to a report by the “Wall Street Journal”, Donald Trump wants to meet with the CEOs of the largest oil companies on Friday to discuss ways out of the difficult situation. According to this, both aid for industry and punitive tariffs on oil exports from Saudi Arabia are under discussion.
The oil price has dropped to its lowest level in 18 years this week. Hardly anyone is driving a car these days, airlines are cutting their connections on a grand scale. Oil producers are not only struggling with the slump in demand in the corona crisis.
They are also suffering from an oversupply as Saudi Arabia and Russia are in a price war and are currently flooding the market with oil. Since the beginning of the year, the price has dropped by around two thirds, and as long as Saudi Arabia does not give in, there is no prospect of improvement.
The meeting is scheduled to take place on Friday at the White House. According to the newspaper report, the CEOs of Exxon Mobil, Chevron, Occidental Petroleum and Continental Resources will also be there. Not all CEOs are supposed to be for punitive tariffs.
Attack on globalization
“Trump has now directly contributed to the crisis in the oil industry. The government is very concerned about the price slump and its threat to the future of the US oil and gas industry, ”said Daniel Yergin, one of the most prominent oil experts. Some of the most influential and important US senators were also concerned about the effects on their states and put pressure on the government in Washington.
Trump has also appointed a special oil representative for US-Saudi Arabia oil relations: Victoria Coates, former advisor to US Secretary of Energy Dan Brouillette. According to Yergin, something had happened that was “unlike anything in the history of the oil industry so far”. Trump is striving for a three-way pact between the United States, Russia and Saudi Arabia – a kind of Super OPEC-plus.
According to Goldman Sachs, the new oil price war is “not just the biggest economic shock of our life”. The oil industry is “in the crosshairs”, although historically it has served as the cornerstone of globalization.
“Shock and awe”
Trump’s threats come against the background that the world’s largest oil company has just announced record production: Saudi Aramco pumped 12.3 million barrels (each 159 liters) of crude oil in a day on Wednesday for the first time in its history, the company said at the company’s headquarters in Dammam in eastern Saudi Arabia. So far, the funding record has stood at eleven million barrels a day.
In addition, the group loaded 18.8 million barrels onto 15 tankers in one day to ship them. The company announced this via a video posted on Twitter.
Saudi Arabia declared an oil price war on March 7 after the failure of the Opec oil cartel agreement with Russia and other producing countries (Opec-plus) to cut further volumes. The country would increase its production as much as possible and also export from the bunkered reserves. So far, Aramco only had the problem of being able to book enough free tanker capacity at the same time.
The Saudi offensive, which oil analysts call “shock and awe”, is intended to push rivals out of the market by flooding the markets and large discounts on Saudi crude oil buyers who can no longer profitably produce at this price level. This applies to both American shale oil production and Russian oil production. “As in any war, it depends on how much pain each side can take,” says Hasnain Malik, head of equity strategy at Tellimer, outlining the battle.
The Russian government claims the country can hold an oil price of $ 25 to $ 30 for six to ten years. Riyadh speaks of being able to live with $ 30 if it sells significantly more oil than before.
Riyadh needs $ 91 per barrel of crude oil for a balanced state budget, according to the rating agency Fitch, Russia, according to the experts of the Rapidan Energy Group, $ 42.4. However, Aramco has production costs of three dollars a barrel, Russian companies need up to 30 dollars to cover production costs.
Massive production expansion
12.3 million barrels has been the declared Saudi production target since the start of the oil price war – the level that could be maintained in the long term, called the MSC by experts.
That Aramco has already reached this level requires respect from experts: “If Saudi Arabia maintains this, it would be an unprecedented demonstration of its capabilities,” said Robin Mills, head of the energy consultancy Qamar. Especially if one assumes that it is about the production and not just about the use of inventory, “then it is an impressively fast start-up,” said the expert.
In September, almost two-thirds of the kingdom’s oil production had ceased after drone attacks on the world’s largest oil processing plant in Abqaiq. The systems were renewed with enormous effort.
BP’s industry-recognized report, the “Statistical Review of World Energy 2019” shows Saudi Arabia’s proven crude oil reserves of 297.7 billion barrels, or 17.2 percent of the world’s total reserves. Venezuela was the only country with large oil reserves with 17.5 percent.
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