June 01, 2023

Russia Ramps up Oil Production

Timothy Birdnow

Saudi Arabia is mad at Russia for lowballing them on oil prices.

According to Yahoo News:

The report found that Saudi Arabia's efforts to curtail production and push oil prices higher earlier this year have been undermined by Moscow's flood of cheap oil supply,and that the oil-rich nation has expressed its anger at Russia for not following through on its pledge to throttle production, the report said, citing people familiar with the matter.

"Saudi officials have complained to senior Russian officials and asked them to respect the agreed cuts," the report said.

Members of OPEC+ said in early April that they would reduce oil output to help prop up oil prices. But recent data suggests Russia isn't following through on its side of the deal as it seeks to generate revenue to help fund its struggling economy and war effort.

Oil prices have been in a solid downtrend since they peaked in March 2022, right after Russia invaded Ukraine, which set off a slew of supply-chain related problems and helped push oil prices above $120 per barrel. WTI Crude oil fell 4% on Tuesday to just under $70 per barrel, while Brent Crude oil fell 4% to $74.07 per barrel.

Saudi Arabia needs oil above a key break-even level of $81 per barrel to help fund its massive budget of so-called gigaprojects, which include a 110-mile long city in the desert called "The Line" and a resort in the Red Sea that's the size of Belgium.

Economic advisors have privately warned Saudi senior policy makers that the kingdom needs higher oil prices for the next five years in order to keep funding billions of dollars of projects, according to the report. That's in part because the projects have failed to attract a lot of investment from abroad.

Now isn't that interesting; Russia is ramping up oil production just as Joe Biden and Kevin McCarthy have agreed to increase American oil production.

American oil is not competitive in a market where oil is cheap. The Russians know that.

So they are ramping up drilling so we can't.

I'm sure the Saudis are mad at the Russians for this; they like being in control of the price of oil. It's their principle tool - and weapon.

This could signal a crackup at OPEC.

What it also signals is lower prices are coming for gasoline and natural gas.

Granted, this helps Joe Biden, who is in desperate need of things improving before the next election. And Mr. Putin would love that; he needs Biden to stay in power. Trump will rein him in if he is elected and Putin knows it.

So riddle me this Batman; if Biden's oil embargo is working why is Putin selling so much more oil and gas?

Posted by: Timothy Birdnow at 11:44 AM | No Comments | Add Comment
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