Shell Share Discussion Threads

[whiskeyinthejar] 02/1/2016 22:48

Not really in Saudi interest to damage global economy. Damaging Iran/Russian economies is a different matter.

News today said Iran has condemned Saudi Arabia for executing a Shia cleric. Saudi executed him because they said he was a Iranian pawn. Iran said quite ominously that Saudi would regret it.

Simplistically, Syria is a Sunni/Shia war so is Yemen. So Iran and Saudi fight on opposite sides. Don't know where this is going, outright war isn't Iran’s style, but sponsorship of terrorism is.

I expect there's a lot of the Shia minority in Saudi Arabia right now who are very angry about their leader being executed, and would quite like to blow up some Saudi pipelines. This would lift oil price, helping Iran so win win for Shia and Iran. Tension is rising anyway.

[11_percent] 02/1/2016 17:29

Norway is already tapping it's Wealth Fund.

[11_percent] 02/1/2016 17:28

monty,

They ain't daft enough to do that.

For whatever reason, they are determined to lower oil price to hurt almost everyone.

[waldron] 02/1/2016 16:42

AN AREA CERTAINLY TO BE WATCHED

BUT THIS MIGHT INCLUDE ALL SOVEREIGN WEALTH FUNDS

NORWAY FOR EXAMPLE

[imperial3] 02/1/2016 16:42

They do indeed.

[montyhedge] 02/1/2016 15:33

The Saudi wealth fund own a lot of bonds and equities in US and UK if they need the money could they start dumping, that would cause the crash.

[waldron] 02/1/2016 15:28

Saudi Arabia: Could This Spark a Stock Market Crash in 2016?
Saudi Arabia Stock Market CrashSaudi Arabia’s Budget Woes Could Trigger Economic Collapse in 2016

The collapse of oil prices to below $37.00 per barrel, compared to $56.00 last January, has sunk Saudi Arabia’s accounts and hurt its budget expectations.

According to the 2015 budget that Saudi Arabia’s King Salman (Salman bin Abdulaziz Al Saud) unveiled on December 28, the Gulf state that is the symbol of oil producing and exporting countries will face a 367-billion-riyal deficit this year, which is about USD$87.0 billion. (Source: “Saudis unveil radical austerity programme,” The Financial Times, December 28, 2015.)

That the decline in oil prices represents a nasty blow to the economy of Saudi Arabia is a given. However, oil is an asset like no other; it is tied to the global financial system and its price drop is affecting the very fate of the kingdom. Because of Saudi Arabia’s key role in the oil system, it has a global impact, potentially causing a major stock market crash in 2016.

Saudi Arabia has never seen a budget deficit of such proportion; it is a historical record and equivalent to 15% of its gross domestic product (GDP). Such a deep hole in the kingdom’s accounts is the result of the drop in revenue from energy commodities exports. (Source: “Saudi Arabia reveals cuts plan to shrink $98bn budget deficit,” The Guardian, December 28, 2015.)

Saudi Arabia exports seven million barrels of oil a day and sales account for 90% of fiscal revenues, or 40% of GDP. At current prices, revenues are but a shadow of their past selves.

One of the global factors linking Saudi Arabia’s budget deficit and related austerity to global economic collapse is that oil prices and commodities are making the riyal-to-U.S. dollar peg increasingly unsustainable, while fueling the risk of a stock market crash in 2016.

This weakness is causing a flight of capital and the depletion of foreign exchange reserves put in place to protect the value of the currency. The mere reduction in revenue due to depressed crude oil prices is then amplified and exacerbated.

Saudi Arabia’s austerity and its global domino effects in 2016: stock market crash. The collapse in oil prices has lowered the confidence of investors worldwide, triggering a domino effect of stock market crashes. One example: the collapse of the Shanghai stock exchange, which sent up some $5.0 billion in smoke in 2015 and triggered losses elsewhere, especially in large emerging markets like the BRICS countries (Brazil, Russia, India, China, and South Africa). The effects will be echoed in 2016 with the potential for a global market crash.

Saudi Arabia and other Middle Eastern countries, such as Egypt, will be particularly vulnerable to any loss in confidence. This has profound geopolitical implications: countries that owe their survival to a generous system of social assistance and an equally pervasive repression could not survive the aftermath and Saudi Arabia has increased its very risk of survival because of its oil price policy. Trouble in Saudi Arabia would have global geopolitical and economic repercussions in 2016—and certainly a major market crash.

Now Saudi Arabia is directly and indirectly involved in four wars (Yemen, Syria, Iraq, and Libya) and is trying to make sure that the government of President Abdel Fattah el-Sisi in Egypt does not implode. In Syria, the Saudis are trying to overthrow President Assad and the costs have increased dramatically. The war shows no signs of ending; in fact, it shows signs that it’s becoming more complicated with unpredictable costs via both economic and political risks.

The Saudi government has been forced to take measures that will amount to nothing short of an unprecedented austerity program in 2016. As announced in a press conference in Riyadh, the Saudi Ministry of Finance will try to save $10.0 billion through budget cuts, mostly at the expense of the population.

Saudi austerity will begin with the cutting of public subsidies. Among other things, Saudis will be shocked to find that gasoline prices will rise by $0.16 to $0.24 per liter. Wealthier Saudis will pay more for electricity and water and smokers will face the inevitable tax increases on tobacco consumption.

Saudi Arabia may even privatize certain economic sectors, which could include the introduction of a bond market, which will issue securities. All of this is new and potentially dangerous for a country accustomed to a budget surplus. It is also a new situation for the world and global markets will react in a bearish fashion, prompting an overall crash in 2016.

As reported by al-Arabiya TV, a few days ago, King Salman, who ascended the throne last January, announced that Saudi Arabia is ready to implement programs to diversify sources of income and reduce dependence on oil as a main source of income. (Source: “Saudi Arabia unveils 2016 Budget,” Al-Arabiya, December 28, 2015.)

Consequently, in 2016, the Saudi monarch would like to narrow the gap between income and expenditures at 326 billion riyals. The budget currently expects expenditures worth 840 billion riyals (USD$224 billion), which is already 14% less than 2015. (Source: Ibid.)

However, revenues are 513 billion riyals and the budget for military spending alone amounts to 213 billion riyals, suggesting Saudi security and fighting terrorism are King Salman’s priorities, even if the sovereign has paid lip service to “development.”

Meanwhile, at the most recent Organization of the Petroleum Exporting Countries (OPEC) meeting, held on December 4, the organization that brings together the world’s main oil exporting countries failed to reach an agreement on cutting production levels, postponing the decision until June 2, 2016. The markets read this move as OPEC, and Saudi Arabia in particular, choosing to forego production quotas.
How Long Can Saudi Arabia Keep Up Appearances?

Given the evident budget constraints, how long can Saudi Arabia keep up the pretense that everything is proceeding according to an apparent plan, when the current oil production regime is driving crude prices to near-collapse in 2016. Saudi Arabia is paying its obstinacy to take out American shale operations, something that may yet succeed, given the fact that the current oil price is well below the break-even mark. The Saudi policy also targets, and given the differences over Syria, the crippling of Russia, which, it turns out, exported more oil than the kingdom in 2015.

As for Riyadh and King Salman’s ambitions, the situation is probably far worse than the budget deficit suggests. Saudi Arabia’s reliance on crude oil is absolute and the standard of living it provides for tens of thousands of Saudis makes it essential for internal stability as well. Indeed, it would not be a stretch to suggest the Saudi royal family’s hold on power depends on its ability to convert oil into a decent standard of living for the kingdom’s subjects.

As Saudi Arabia has been burning through reserves at an unprecedented pace over the past year, mostly to support military spending and social welfare to keep social unrest in check, it is unclear what King Salman has in mind when he urges diversification. Even SABIC, the huge Saudi chemicals consortium, relies on oil production. Indeed, social spending is where the budget deficit exposes its biggest risk for the kingdom.

The reality is that oil production revenues have masked the problem of Saudi indigenous unemployment and underemployment, both of which are at unsustainable levels because the private sector labor market is based almost exclusively on foreign labor (Asian) and menial jobs. The public sector, meanwhile, is filled with Saudi citizens interested mainly in pocketing generous state salaries while their jobs are seen as a right, an essential component of the bargain between the House of Saud and its subjects.

Now the kingdom is coming under increasing pressure to cut, as much as King Salman will insist on reducing costs. It will be next to impossible to downsize the welfare state, much less the military budget. During the peak of the “Arab Spring” in 2011, Saudi Arabia raised its welfare budget in order to discourage the population from revolting. How will King Salman confront the current crisis?

[montyhedge] 02/1/2016 15:20

Buy BG short Shell, its a cheap way to buy Shell shares. If you think this crazy bid will go through.

[imperial3] 02/1/2016 15:17

BP CEO said he did not expect oil to go any lower than $30 but that prices are likely to remain low for the next couple of years.

[leonasdad] 02/1/2016 10:34

imperialallcoloursandnumbers
address

[imperial3] 02/1/2016 10:28

The last paragraph is the key.How long do we have to wait before the rebound? 2,3 years or more?

[nw99] 02/1/2016 09:04

Times top buy rec is BG as a cheap way into Shell and they will maintain the divvy

[xxxxxy] 01/1/2016 22:59

Long way down.

hxxp://sharecast.com/news/royal-dutch-shell-starts-production-at-corrib-gas-field/23782568.html

[nw99] 01/1/2016 11:58

Might thoughts as well happy to buy here oil isn't going much lower all the traders are short and squeeze will come

[waldron] 01/1/2016 11:17

hmmmm roasted shorters

sounds real good

[waldron] 01/1/2016 10:04

Oil Market: Little room for comfort – HSBC
Tue, Dec 29 2015, 12:25 GMT | FXStreet
Related News

Oil on track to post 30% yearly loss
GBP/USD bounces-off lows ahead of 1.4800
USD/CAD remains capped by 1.3900 amid stabilizing oil

FXStreet (Delhi) – Research Team at HSBC, suggests that following the 60% drop in crude prices since mid-2014, the market seems to be fixated on the risk of further falls.

Key Quotes

“This is understandable given a backdrop of firm supply pressure from OPEC, large inventory overhangs and the potential for increased Iranian exports next year. However, we believe investors should be increasingly concerned about the risks of a sharp move higher in crude prices. Not only should the extent of oversupply fall dramatically in 2016, but low spare capacity within OPEC means that buffers against unexpected supply disruptions are very limited. Moreover, if OPEC abandons its policy and reduces output, prices could well rally considerably. As far as tail risks go, they seem skewed firmly to the upside, in our view.”

“Producers outside OPEC have responded much more quickly to lower oil prices than the market was expecting. The most striking evidence of this is the relentless series of downgrades to non-OPEC supply growth estimates. Looking at the monthly evolution of the US Energy Information Administration’;s (EIA) forecasts, 2016 non-OPEC supply growth was seen at 0.8mbd in February. Just nine months later, the forecast points to a y-o-y decline of 0.3mbd. The International Energy Agency (IEA) sees an even larger fall of 0.6mbd, which would be the largest annual decline in non-OPEC output since 1992 (when the collapse of the Soviet Union resulted in a 1mbd contraction). According to the IEA, non-OPEC volumes grew 2.5mbd as recently as 2014.”

“The biggest supply response thus far has come from US tight oil production, which has a much shorter production cycle than conventional oil extraction. The US onshore rig count has fallen sharply by 66% since the peak in Q4 2014, and the full effects of this have only recently started to translate into falling production. On our estimates, liquids output from the main US onshore plays should fall around 650kbd y/y in 2016. However, it’s important to remember that US tight oil only accounts for around 5mbd out of total non-OPEC supply of nearly 60mbd. Large project deferrals and cancellations will only impact supply some years down the line, but decline rates from existing production are likely to rise in the near term as the industry cuts back on maintenance capex such as infill drilling.”
News provided by: FXStreet

[leonasdad] 01/1/2016 09:46

I wonder what HSBCs position is on oil

[maywillow] 01/1/2016 09:40

i am betting that shell might well fall to 1400

before moving up gradually to at least 1900 during the later part of year


so the longtermers have little risk with a divi as cherry on the top


HAPPY NEW YEAR

[rcturner2] 01/1/2016 09:25

AEP in the Telegraph stated that although supply is ahead of demand the ratio is actually very tight and won't take much to change. Low oil price is a massive economic boost throughout the major economies, so demand is only going to increase.

[osirisra] 31/12/2015 22:38

Check the POO graphs for the last few months. You will see that there did seem to be a floor to the price in mid November at around $43. The graph of the Christmas period is quite similar but around the $37 mark.
Two differences, the rate of decline into the temporary floor in November was a lot steeper than the rate of decline through December. The kicks up from the December floor have been more pronounced.

I would be willing to say that if the graph continues to the middle of January as it has done through Christmas then we are witnessing the bottom.

[fireplace22] 31/12/2015 13:30

Would hope the BOD think slightly more longer term than the next few months. The low oil price is not sustainable beyond that, recent lack of investment in developing reserves and steadily increasing demand will see to that - whatever the Saudis do.