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Oil Crashes!!! U.S. Produces So Much Oil That They Even Sell To The Arabs



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Feb 08 2018
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The Friday-Monday stock markets crash should serve a reminder to investors and speculators about the basic fundamental of investing – whatever goes up must comes down – eventually. As experts and economists are now locking horns debating whether the stocks have seen the worst of it, or this could be just the beginning, another commodity has started crashing.

 

Crude oil appears to be crashing after reaching the psychology US$70 level, but has failed to breach beyond that in a meaningful way. The Brent Crude Oil has tumbled to US$65 level, arguably an important support level. If it could not hold at this level, it would flirt within US$64 and US$62 region. And that’s bad news to Saudi Arabia and Arab producers.

 

Oil prices fell after U.S. government data showed America crude and fuel stockpiles rose last week, while American shale drillers continue to increase production. The commodity which was caught in a broad market sell-off during the scary Friday-Monday’s 666-point and 1,175-point sell-off has chosen to extend its losses even though the U.S. stock markets have temporarily recovered.

US Oil Tanker at Port

Brent Crude Oil Prices Chart - 8Feb2018

According to the U.S. Energy Information Administration (EIA), America crude inventories rose by 1.9 million barrels to 420.3 million in the week through February 2, thanks largely to a build-up of stockpiles in the Gulf Coast refining hub. Stockpiles of gasoline and distillate fuels such as diesel also rose unexpectedly by 3.4 million barrels and 3.9 million barrels respectively.

 

After it was revealed last week that for the first time since 1970 – almost 50 years – the U.S. oil production tops 10-million barrels a day, the American oil producers haven’t looked back. In November 2017, the U.S. oil production rose to 10.038 million barrels a day. Now, EIA preliminary figures show production is running at 10.25 million barrels a day.

 

Rubbing salt into Middle East’s injury, EIA on Tuesday forecast U.S. production will average 10.6 million barrels a day this year, enough to continue surpassing output from Saudi Arabia. If the trends continue, American output will shoot to 11.2 million barrels by next year (2019); effectively overthrowing Russia as the ultimate top crude oil producer on planet Earth.

US Shale Producer - Driller

As a matter of fact, the United States produces so much oil that they manage to sell a fridge to an Eskimo, metaphorically speaking. It would be insane in the past to think that the Arabs would one day buy oil from America. Yet, the unbelievable has actually happened. And that Eskimo who has just bought a fridge from America is none other than U.A.E. (United Arab Emirates).

 

The U.A.E., a Persian Gulf petro-state which earns endless billions of dollars from crude exports apparently bought oil directly from the U.S. in December 2017. Data from U.S. Energy Information Administration reveals that a tanker, carrying a type of very light crude oil, sailed from Houston and arrived in the Persian Gulf last month.

 

That tanker – Seoul Spirit – shipped the cargo from Enterprise Products Partners LP’s Houston terminal and arrived on January 31 at the Port of Ruwais in Abu Dhabi. In December 2017 alone, the U.S. exported about 700,000 barrels of light domestic crude to the U.A.E. The Middle Eastern nation had relied on Qatar for its supply but discontinued the practice since a political crisis.

United Arab Emirates Dubai Skyscrapper

After 40 years at the mercy of Arab nations, everything went upside down on January 2016 when America started loading oil tanker – Theo T – to send its first shipment of crude oil to a Dutch oil-trading powerhouse – Vitol Group. Of course, none of that would happen if not for the end of a ban on U.S. exports in 2015, which in turn trigger the explosive growth of shale production.

 

Shipments from U.S. ports have increased from a little more than 100,000 barrels a day in 2013 to 1.53 million in November 2017, travelling as far as China and the U.K. Essentially, the flow of petroleum around the world has changed. OPEC cartel leader Saudi Arabia is now caught between a rock and a hard place. The kingdom is now losing market share as well as failing to keep the oil prices high.

 

The IMF (International Monetary Fund) had revealed that in order to achieve zero deficits in 2017, Saudi’s breakeven oil price is US$73.10. Assuming that is still true for the financial year 2018, which is not because the Saudis had announced a budget of US$261 billion, the kingdom’s largest ever, the present weakening oil prices is obviously disturbing.

US vs OPEC - Sheikh vs Shale Driller - Gunfight

 

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