{"id":361,"date":"2017-02-01T15:05:13","date_gmt":"2017-02-01T15:05:13","guid":{"rendered":"http:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/?p=361"},"modified":"2017-02-01T15:05:13","modified_gmt":"2017-02-01T15:05:13","slug":"saudi-arabia-will-continue-to-cut-oil-output-for-months-and-years-to-come","status":"publish","type":"post","link":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/2017\/02\/01\/saudi-arabia-will-continue-to-cut-oil-output-for-months-and-years-to-come\/","title":{"rendered":"Saudi Arabia Will Continue To Cut Oil Output For Months And Years To Come"},"content":{"rendered":"

(FORBES):<\/strong> Saudi Arabia has kept its promise. It has cut oil output by 486,000 barrels a day<\/span>,<\/span> in line with the OPEC agreement the Kingdom pulled together last October, helping oil stabilize above $50 per barrel.<\/span><\/p>\n

That\u2019s music in the ears of American frackers, who have been bringing oil rigs back to life at a feverish rate\u2014111 in the last two weeks alone; countering Saudi oil cuts, and keeping oil prices in the $50 to $60 range, for now.<\/span>\u00a0\u00a0<\/span>Still, Saudi Arabia\u2019s output cuts <\/span>are <\/span>just the beginning of a trend that is expected to last for months and years to come, irrespective of what American frackers do.<\/span><\/p>\n

There are good reasons for that.To begin with, the Kingdom has learned a lesson the hard way: it cannot end the American fracking revolution by engaging in a price war with American frackers<\/span> — which<\/span> have demonstrate<\/span>d<\/span> an exceptional ability to survive even at ex<\/span>tremely<\/span> low prices.\u00a0<\/span>Moreover<\/span>, Riyadh\u2019s leaders do not want to antagonize the new Washington administration by declaring another war on American frackers.<\/span><\/p>\n

Then, there\u2019s Riyadh\u2019s grand plan: the Aramco IPO — sell shares of state-owned company Aramco to the public to finance its vision 2030, which will make <\/span>the Saudi<\/span> economy less dependent on oil.\u00a0<\/span>The success of Aramco\u2019s IPO, which promises to be the biggest in history, relies heavily on the state of the oil and equity markets\u00a0at the time <\/span>of<\/span> the \u201croad show\u201d\u2013 the<\/span> date for<\/span> marketing of <\/span>the <\/span>IPO.\u00a0The higher the oil prices, the easier i<\/span>t will be<\/span> to sell <\/span>Aramco<\/span> to institutional investors at a high price.<\/span><\/p>\n

But there\u2019s another factor, more fundamental, which will <\/span>cause<\/span> output cuts <\/span>to <\/span>last beyond the IPO. The Kingdom may be running out of oil faster than previously thought<\/span>. I<\/span>ts major oil fields <\/span>have <\/span>become mature, and new fields are hard to come by.<\/span>\u00a0<\/span>The trouble is that it\u2019s very hard to substantiate this factor, due to the secrecy that surrounds the Kingdom\u2019s oil reserves.<\/span><\/p>\n

\u201cWhat we know about the Kingdom\u2019s oil is pretty much what Saudi Aramco, the Petroleum Ministry, and the royal family want us to know<\/span>,<\/span>\u201d writes Matthew R. Simmons in Twilight In The Desert: The Coming Saudi Oil Shock And The World Economy<\/i>(New York: John Wiley& Sons (2005)-p.19. \u201cThe \u2018known facts\u2019 about Saudi Arabia\u2019s oil, then, are few and simple. In 2004, \u2018proven oil reserves\u2019 totaled 259.4 billion barrels, plus another 2.5 billion barrels in the Saudi-Kuwait neutral zone. If these proven reserve numbers are real, it means that Saudi Arabia\u2019<\/span>s<\/span> oil will last another 90 years at the current production barrels per day.\u201d\u00a0<\/span>Adding to the secrecy surrounding Saudi reserves is persistent inconsistency of oil production data published by different agency. \u201cThere is a persistent lack of close agreement among estimates made by Saudi Aramco, the International Agency, the U.S. EIA\/DOE and BP\u2019s annual Statistical Review of World Energy of the amount of Saudi Arabian oil produced each year from 1988 to 2004<\/span>,<\/span>\u201d continues Matthew R. Simmons.\u201cThe variances between these sources highlight the uncertainty about the volume of oil that Saudi Arabia produces (p.88).\u201d<\/span><\/p>\n

While only time will tell how long Saudi Arabia has before running out of oil, Saudi output cuts will stabilize oil prices in the $50 to $60 range, provided that the world economy grows fast enough to absorb the added supply that will come from American frackers.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

(FORBES): Saudi Arabia has kept its promise. It has cut oil output by 486,000 barrels a day, in line with the OPEC agreement the Kingdom pulled together last October, helping oil stabilize above $50 per barrel. That\u2019s music in the ears of American frackers, who have been bringing oil rigs back to life at a feverish rate\u2014111 in the last… Read more »<\/a><\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[39,41,40,6],"class_list":["post-361","post","type-post","status-publish","format-standard","hentry","category-article","tag-aramco","tag-fracking","tag-oil","tag-saudi-arabia"],"_links":{"self":[{"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/posts\/361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/comments?post=361"}],"version-history":[{"count":1,"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/posts\/361\/revisions"}],"predecessor-version":[{"id":362,"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/posts\/361\/revisions\/362"}],"wp:attachment":[{"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/media?parent=361"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/categories?post=361"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/middleeastandnorthafricablog\/wp-json\/wp\/v2\/tags?post=361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}