Falling oil price tilts political, economic balance in U.S. favor
Posted by EXOGEN on September 12, 2014 at 2:35pm
BY DAVID SHEPPARD AND RANIA EL GAMAL LONDON/KUWAIT Fri Sep 12, 2014 11:08am EDT
Gasoline prices at a 76 gas station are displayed in Encinitas, California, February 19, 2013.
CREDIT: REUTERS/MIKE BLAKE
(Reuters) - The drop in oil prices to their lowest in two years has caught many observers off guard, coming against a backdrop of the worst violence in Iraq this decade, heightened tensions between the West and Russia, and sanctions against Iran
But as rising supplies of North American crude and tepid demand have pushed prices LCOc1 below $100 a barrel, the move underlies how the shale oil revolution is creating a political and economic advantage for Washington and its Western allies.
Russia and Iran are heavily reliant on oil sales and face budget shortages at current price levels, analysts say, weakening their position when negotiating over Ukrainian sovereignty or the Iranian nuclear deal.
And higher oil production from the United States as well as Canada is providing a buffer against the threat of retaliatory supply curbs from Russia or further disruptions to supplies from the Middle East.
"The increase in production is definitely benefiting the United States," said Professor Paul Stevens at the Chatham House think tank in London.
"The Russians are very exposed to lower oil prices. We don't know to what extent it will influence their behavior in Ukraine, but they're certainly going to feel pressure on their budget."
Russia's ruble currency has already fallen to a historic low against the dollar as its economy is hit by sanctions from the United States and European Union over its involvement in Ukraine. That increases the price Russians must pay for many imports, from vegetables to luxury goods.
Daily oil production in the United States has risen sharply since the financial crisis. In 2010 the country still imported half of the crude it consumed, but the U.S. Energy Information Administration forecasts that will fall to little more than 20 percent next year.
Even as the United States has largely maintained its ban on exporting crude, it has left a lot of barrels from West Africa and the Middle East looking for new homes. While U.S. energy company profits might take a hit from lower prices, consumers will benefit more from spending less at the pump.
For Iran, a lower oil price not only harms its economy, already hit by sanctions that specifically try to cut its oil sales. It also means there is less pressure on the West to reach a deal quickly over Tehran's nuclear program.
With oil prices falling, the immediate economic incentive of getting Iranian barrels smoothly back to the world market is diminished, analysts say, allowing Western powers more leeway to drive a harder deal.
Some energy analysts even say Islamic State, which has captured a number of oilfields in Syria and Iraq, will be hurt by lower oil prices as it is forced to discount further the black market sales that help fund the militant group.
"Recent advances by the Islamic State (IS) have disrupted Middle East politics and shifted incentives for key regional and global players," Bank of America-Merrill Lynch analyst Francisco Blanch said this week, arguing that U.S. ally Saudi Arabia may be comfortable with lower prices.
"Lower oil would hurt IS, Iran and Russia, but help the West," Blanch said, adding that he saw the breakeven price for Russia's budget at around $105 a barrel.
For Saudi Arabia, the world's largest crude exporter, lower prices may create some short-term budgetary pain, but observers believe the kingdom is willing to absorb the impact as it does greater damage to regional rivals such as Iran.
Saudi Arabia has said for years that it will supply the world with the oil it needs.
"Have you ever seen me concerned?" Saudi Oil Minister Ali al-Naimi said on Thursday in Kuwait when asked whether the price fall was worrying the kingdom.
"This is not the first time prices change, they always change. It's a dynamic process," he told Reuters.
Other Gulf delegates attending a meeting of oil ministers from the region said the price drop was unlikely to spur action from the Organization of the Petroleum Exporting Countries (OPEC) unless crude fell below $85 a barrel.
"It is a fact which is bound to focus minds in the Gulf and in wider OPEC but we also need to remember that this follows many months with good prices from their point of view," Samuel Ciszuk, senior adviser on energy security to the Swedish Energy Agency, told the Reuters Global Oil Forum.
Saudi Arabia is likely to "micromanage" supplies at it has for a number of years, Ciszuk said, but it was unlikely to push for an official OPEC supply cut.
While U.S. oil output has been rising fast, part of the big jump in supplies has come from countries that remain at risk of supply disruptions, including Libya and Nigeria.
"No fundamental improvement in the stability of those countries has actually taken place, which means that the added supply is extremely vulnerable," Ciszuk said.
Libya's oil production has rebounded to more than 800,000 barrels per day, the National Oil Corp said this week, eight times the amount of just a few months ago.
But the increase, which followed a deal to end a near year-long rebel port blockade, has come at a time when the government is losing control of the country, with an armed group taking over the capital Tripoli last week.
For now, however, the U.S.-led surge in supply and weak demand have seen traders start to store additional barrels as they wait for prices to recover.
"Given the volatile situation in the MENA (Middle East and North Africa) region," the International Energy Agency said, "this is a benefit to global energy security."
EXOGEN Follow the CLUES!!!!!!!!!!!
Martin >Yes EXO needs to give a PSA (projected Santa arrival). I need to get milk and cookies.
EXOGEN > Martin Santa should have been here today at the time posted on yesterdays clock (9:00 PM)
Lady Smarz > EXOGEN I was hoping you would say that because I was looking for Santa at that time. Hope is still Alive.
Rico all the posting you did last night and then the post from tnt we all felt it was happening. wow a let down.
EXOGEN > Rico... iTS HAPPENING RIGHT NOW GO READ THE BLOG
carol Sunshine, How do you feel about today being a great day for dinarland? I was happy to see all the post by EXO I hope things are a go and, you have a great Friday :D
Sunshine62 > carol Carol. You know Friday is always a great day for an RV. We are certainly at the best place we have ever been, and personally I think we just could not get any closer!! You have a great day too
INTEL CLUES & IMAGES 3:58 PM EST Posted by EXOGEN on September 12, 2014 at 3:58pm
FD September 12, 2014 at 4:08pm Europe has started exchanging through bank's wealth managers. USA waiting. Wow soon is our turn :)
robert private exchanges through bank wealth managers happening right now hopefully mon/tues public will be next
Larry Bush Private groups receiving phone calls and e-mails for the 800 numbers in the USA.
L T The private groups or public expected to go in 24-72 hours?
L T The private groups or public expected to go in 24-72 hours? Do the groups need to be done before public can go?
D.K.C. > L T I think all of Dinarland (Those paying attention) is considered a group
EXOGEN > D.K.C. CORRECT
G T September 12, 2014 Clues......
Currency Exchanges have Started in Europe (CONFIRMED) through Banks Wealth Managers
United Nations Are FINISHED with The Balancing the GCR?
USA is Waiting for the Private Exchanges to Start
Should be Receiving #800s via Email & Phone Calls Projected in the NEXT 24 Hours
Defense & Interior Ministers will be voted on in Iraq on Tuesday!!!
G T > The RV/GCR & The Vote in Iraq are 2 Separate Issues. The CBI was ready to release the RV either at 9AM (EDT)!this Morning or 9PM (EDT) last Night!!! They have Told ALL BANKS TO BE READY!!!
It could go to 72 Hrs.....But if their HONORING Bank Exchanges in the Middle East & Europe NOW.......You think They'll wait 72 hrs?????
I Don't Think So.....(IMO) AND EXO's Clues say 24 Hrs
Mr. Chen some countries have already started exchanging in the middle east and into Europe confirmed by wealth management of banks
balancing of countries currencies for the GCR is finished
waiting in the USA for 1800#s and emails to exchange
USA projected to start exchanging in 24 to 72 hours
Everything is moving at a fast/top speed to completion
Department of Defense and Interior of Iraq will be voted on Tuesday
Make sure you have your defense mechanisms ready to avoid all the traps at exchange
There are many strategies and plans to have for the exchange process, look them over and find the one that's best for you