Oil sinks.
Much noise about cuts is made, in the hopes no cut will be necessary. Oil sinks anyway. Fear begins to show as everyone nervously looks at Saudi Arabia ($49/barrel fiscal break-even), wondering if it will agree to cuts. (Saud is the kid who has the rugby ball in his locker. If he turns up sick at attendance in the morning, there won’t be any pick-up game at recess). There is a long enough pause where Saudi Arabia ignores the glances, then the whispering begins and everyone starts to look at Iran ($90/barrel fiscal break-even). Iran is trying to act very tough and assured, but the act is wearing thin and everyone knows someone stole Iran’s lunch money last week.
Things are starting to get pretty testy. The whispering is getting louder. Then, Saudi Arabia makes some noises that could be interpreted as agreeing to cuts. Desperate to believe it, confirmation bias takes hold of the members, and everyone acts as if cuts are fait acompli for a while. Saudi throws some sand in Iran’s eyes just for kicks. Iran looks really pissed, but chokes down any protest and slinks off. Oman ($77), Bahrain ($75) and Algeria ($50) look very relieved, and even start to socialize a bit (amongst themselves. No one really likes them much anyhow). Iraq ($111) is hiding near the lunchroom and the school safety officer looms over him anyhow so he is highly unlikely to get to play with anyone.
Time passes. It occurs to everyone that Saudi Arabia hasn’t done anything about that whole “cutting” thing. Now that the other kids think about it, Saudi didn’t technically say it would make any cuts at all. Panic sets in. Lots of “emergency” huddle circles are proposed, but no one actually wants to set a time for one for fear Saudi Arabia won’t join the huddle at all and super panic will set in. There is some sideline effort to involve Kazakhstan ($59) and Azerbaijan ($40), but they don’t speak very much, have strange accents and smell funny. The effort is weak, at best, and its failure surprises no one. Libya ($47) is brown-nosing the school safety officer, who is too busy with Iraq to pay any attention. The other kids just glare at Libya.
Kuwait ($33), Qatar ($24) and UAE ($23) ignore everyone else and spend most of the time joking amongst themselves. The school safety officer smiles at them politely. They have the best grades in the class.
A sudden silence comes over the playground (like an old E. F. Hutton commercial). Saudi Arabia says, “there will be cuts!” which prompts tremendous celebration and joy, even Kuwait can be seen bouncing a toe to the cheesy music now playing from soemone’s iPod. While everyone is enjoying themselves, Saud smiles quietly, sneaks off and then cheats anyhow when no one is looking.
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
1st
2nd
Cut.Print.Check the Gate!
Maybe if you wrote it in fucking english we could fucking understand it.
EP – a whole post wrapped in some freudian analogy is boring.
You’re an alcoholic! YOU GOT A DISEASE!
EP may be an acoholic…but my alcoholic
Too oily, didn’t read
EP -
Pickens owns Yahoo?
@4- get a grip dude…. relatively easy to get the story. If the nuances of the oil cartel are not interesting to you just move on
@8…your mom’s a crack whore.
@8…your mom’s a crack whore.
Where’s bad ass johny with the suitcase nuke? There he is….in the middle of the room! Boom!!!
no one will be missed but bad ass johny
Rugby? Really??
@13
Slightly homoerotic, violent beyond making a point.. I’d say it fits the bill.
Excellent.
Excellent narrative. All of you pinheads that do not understand the subtleties can go back to your ops and settlement departments and read the NY Post.
boring
Rugby and the playground are hardly Freudian. Other than carring a ball…
@17…agreed.
EP – pack it up for today and come back tomorrow and bring it strong. Today just wasn’t your day.
18 Can’t say for sure, but I think that you think (erroneously) that freudian and homoerotic are the same thing. Not true. BTW: rugby is def homoerotic. LAX though is simply gay. GAnalYst
looks like somebody wishes they worked at the economist. bring on the snark. i want gasparino rants. i want hedge fund blowups. i want sexual innuendo involving bess. this … not so much
tldr
@21…agreed.
@21…agreed.
Too Equity Private, didn’t read
26th!!!
where do you get these breakeven oil numbers from?
Same place which promised 200 oil this year?
20, Aren’t all mens team sports a bit homoerotic? All that hugging and bum slapping after a score… anyway, I do know the difference, and was responding to 4. I still don’t see how Rugby is Freudian.
Maybe it is though. The ball, which drops like a baby from a stalk into the arms of the waiting player (who hold it to their chests and protect it) before passing it backwards (again to protect) when they feel that their role as promary caregiver is no longer viable due to the oncoming opponents. If there is no opportunity to pass they just go to ground, putting their own selfhalm in the way of anything else related to the ball. The ball’s blonde / yellow leather is of course designed to make a connection to a newborn, its stitching a relfection of the epesiotomy that the mother has just gone through.
i thought it rocked
any more layoffs? GS cutting on wednesday i hear?
Charming prose, as always.
Are these the Bank of Kuwait numbers? If not, please post the source. I’m curious.
28 I see. Didn’t see you were responding to 4. Yeah, team sports are all kind of homo, but rugby for some reason seems to go beyond. I’ve heard it said that its because its a little more dangerous than most, which promotes a special kind of brotherhood, combined with the fact that the guys are well built and not freakish like they can be in football or basketball. Its similar to why the best frat house on campus tends also to be the gayest. GAnalYst
@27
Calculating cash costs for extraction is quite a different process from predicting future supply/demand (especially when the latter’s tinged with Goldman stimulated derivatives).
Of course, if you factor in the purchasing power of the dollar vs the currencies in which those costs are incurred, the numbers may well look understated…
Icahn is on Fast Money right now
@34- he’s been on like every week for the last month or so
Hey,
Has anyone heard what Sheik Associate numbers are this year? Thanks.
Nice summary of the oil kids. Good article.
i don’t understand a breakeven price. isn’t is P*Q?
i don’t understand a breakeven price. isn’t it P*Q?
ep: i like your writing.
sometimes i like to think of your writing and bess’ writing at the office late at night, both dilligently chipping away at the mountain of work before you. then your writing has had it, dismissingly tosses its horn-rimmed op’s onto the desk, and shakes its lusterous hair free. bess’ writing notices and walks over – lured by the subtle notes of hyacinth and leather set free in one quick motion. while admiring each others ability to seamlessly incorporate semicolons into prose, something happens and your writing starts to view bess’ writing in a completely new light. before you know it, the air is thick, laptops and papers are strewn about the floor, and both writings lay panting on the editors desk – spooning like adjacent commas.
@ 28
Stalk or Stork?
looks like all the state school grads reading dealbreaker can’t handle good writing
oil breakeven for countries doesn’t even make any sense.
What % is fixed cost? Cause building another condo/hotel in Dubai don’t count.
@38 – the break-even price is the price oil would have to be at in order for the operators to …..drum roll please…break even on their investments!
The numbers that EP mentions in her articles, though, are the prices crude oil would have to be at in order for the respective countries to balance their national budgets (since most of their revenues are from oil and they assume a price of oil for the coming year while preparing their budgets)
@40, based on bess’s writing i doubt she knows what a semicolon is, but i am certain that she knows what a colon is.
39 actually P*Q would be total revenue
funny post !
I know a ho mo’ erotic than my gal.
~Smoove B
The Onion
EP – as one of your fans in “oil country” to the north and east of NY – I thought the article was great.
I sent it to one of my pals who runs a profitable commodity prop book and he thought it was right on the money (so to speak).
so arabs like rugby? whatever happened to polo? Badmitton? or the ever former colony favorite cricket?
I am a little confused by the sports topic! lol
Lets just give them a glass court over that sand and go back to the stone age.
@26 ROFL!
39 here
So that’s the part I don’t get. For a gov’mnt to breakeven, it’s a function of the production and price (not just price).
How are these governments going to take the leap of faith?
They can reduce output for a known reduction of revenue and hope for a price increase for an unknown increase in revenue. Or they can just produce like hell and hope the other guy takes a hit. For a govt that is already in the hole, I think the opt for plan B.
In order to for a person to believe all this “breakeven” nonsense, one must first subscribe to the all the bullshit about production limits . Saudi Arabia can stick straws in the ground and draw oil. All that nonsense was propogated by mostly buy side analysts to support paired oil and commodity trades. One of the biggest speculative bubbles since that Dutch tulip crap.
They will keep producing because they got used to the money.
The only real risk here is an asshole like Putin starting a serious war to cause shock.
you guys are idiots… peak oil has been confirmed from the “father” of modern oil prod. theory, down to the ACTUAL_PRODUCTION_FIGURES. This is a secular shift… and the easiest way to make money over the next few years.
awesome. Love the writing
omg! 54 went all cap locks on us!!
Must know what heshe is talking about…
oil is going to sub $50. Should be a major down move in the next 1-3 days.
http://tinyurl.com/6osngs
@54 Modern Father huh? Any chance his offspring works in AIG’s riks department?
@4 sorry this might be a little tough, how about you go back to the USA Today? There’s pretty graphs and shiny pictures.
this is pretty good
I googled “fiscal break even” and OPEC, trying to find your source. No dice, but I was amazed at how many times this piece has been reposted overnight. This site is well read – just think how many people see (and contribute to) all our infantile comments!
@53 and others — The “break even” point is not a realistic limit on whether any of these nations pump.
But as far as “Saudi Arabia can stick straws in the ground and draw oil” — not anymore — the huge Ghawar field is now more dependent on saline injections than a has-been east-bloc hooker. The days of “easy oil” are over.
@62
agree and whats more – the price of oil in non-recession scenario will be driven by refining capacity rather than crude output – that is the most inelastic part of the value chain.
@62
KSA’s proven reserves have not risen with demand over the years, granted. But Ghawar has a lot of life left in it – water injection has little bearing on your conclusion. Water injection started in 1965, and has been utilized to efficiently sweep the reservoir while keeping formation pressure up. Basically, there are three rings of wells around the perimeter of the 174 mile by 16 mile by 280 foot thick Arab-D main productive interval. The inner ring produces; the middle monitors water encroachment; and the outer ring wells are injection. As an area depletes, additional wells are drilled or converted. Still lots of oil, but we use a lot more than we did when the field was first developed.
http://www.aapg.org/explorer/2005/01jan/ghawar.cfm
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