Trump and Saudi Collision on Oil and Bingaman’s Return to SF

In an earlier column, readers overseas benefited from this writer’s forecast

that crude oil prices would fall dramatically because most commodity

traders got it wrong. Simply, this column’s analysis was the buying of

oil assumed a shortage would result once the sanctions against Iran

would be activated the first week of November. President Trump

wanted lower oil prices with OPEC and Saudi Arabia pumping more.

Two weeks ago, a call from the Middle East confirmed readers of

the column had followed the analysis in the Energy Magazine and

sold Brent oil and profited. Oil has slumped under $60.00 as the delusion

of a shortage vanished. In the November issue column, this writer

made a call: the oil price would reach $50.00 as a low. There is

no change in that forecast The price in the commodity

market for WTI crude would touch in the very high forty dollar

range before the Saudi-led production cut-back is realized.

Why? Again, too much capacity to produce too much oil for

demand. Oil demand without commodity traders bets on the

sanctions against Iranian oil production and export contradicts

flagging demand. Some Southwest shale producers, faced

with discounts on domestic sales, are exporting oil to world

markets and capturing the higher Brent price or differential

between the WTI priced Midland domestic and the

Brent price for the World. But this would shift

Southwest tight oil into a world market where such

Supply also chases weaker demand. This switches U.S.

oil into world oil as exports and diverts it from

going into U.S. storage.

Unlike the last three price sell-offs Saudi Arabia ,

speaking for OPEC, is strangely silent on calling on

non-OPEC producers join it in lowering production.

or “balancing” the market. Quite the opposite. Led by

Shale producers in the Delaware (New Mexico) Basin in

the Permian complex, United State production approaches

12 million barrels per day, a historic high and number one position

A gainst the Middle East and Russia.

Only a serious price decline , short of the 2015 bottom, would

signal oil non-completions and a cut back of U.S. production by 750,

000 barrels per with an OPEC cut back independent 0f Russia production

of around one million barrels will stabilize or balance the world

oil market. But U.S producers cannot (anti-trust) belong to a collective

price-setting organization (cartel). President Trump wants lower

Prices even if this means a breakup OPEC into two and a moderate

production roll-back by Southwest producers – a negative cash flow

for those without or less advantaged by Tier One wells.

The overwhelming Democratic Party electoral win influenced

OPEC and Saudi Arabia to resist President Trump’s pressure

for lower world oil prices because he is much weaker and

easier to upend in oil supply and demand world “domination.”

The Democratic Party indirectly dimmed the “blue flame”

price outlook regardless of blue wave voting margins. But

enough of “color revolutions” in politics or economics?

This writer is constructively reacting to the return of former Senator Jeff

Bingaman to New Mexico’s politics through new State Governor. She

asked him to head her Transition Team. With Democratic

Party factionalism into Progressive/Ultra-Progressive forces

against the traditional Moderate/Conservatives, Senator Bingaman’s

experience and history in working with the late Senator Domenici

in forging the U.S Energy Act of 2005 is in best interest of New Mexico.

Recall the energy policy of “all of the above” in the Bush and

Obama Administrations coupled with the Energy Policy

of outgoing Governor Martinez was a compromise of give-and-take

between two New Mexico Senators of different parties and energy

policy objectives.

Dr. Daniel Fine

New Mexico Tech
State of New Mexico Facilitator
Export of New Natural Gas to Mexico