“Barring an economic collapse, I am sure that the hold on the production of Petroleum It will last until the end of December." Hani Abuagla, Senior Market Analyst at XTB Mena, entrusts this forecast to one of the most listened to newsletters in the energy world. Why until December? “Because by that date – is the answer – Aramco will launch a new capital increase of at least 50 billion dollars. It is obvious that the Saudi oil giant wants to present itself to the market in the best conditions. Afterwards, perhaps, other considerations will prevail: the decline in Chinese demand, the slowdown in growth due to the high level of interest rates and so on. The outbreak of a global crisis is not in OPEC+'s interest."
The US shale oil industry is in trouble
These reflections accompany yet another price hike which this morning took a new step forward towards the ceiling of 100 dollars (Brent above 95 in the morning, WTI crude at a generous 93 dollars), on the wave of a rise that since last June, when the cartel adopted the strategy of production cut, almost 30%. A verdict that rewards two winners, that is Saudi Arabia e Russia and it sounds like a bitter defeat for the United States and its Western allies. Unlike what happened a year ago, the White House was unable to counteract effective moves nor divide the producers' front. In 2022 the US administration made extensive use of strategic stocks to support supply and control petrol prices. But this policy turned out to be dangerous in the long run because in the meantime, the production of US shale oil fell (the Cushing basin deposits are at historic lows) as well as the investments of Big Oil, deaf to the president's requests. The big oil companies prefer to distribute the fabulous profits obtained from the increase in prices to shareholders in the form of buybacks rather than engage in new explorations or even investments in refineries: the risk of encountering a sharp drop in demand in a few years is too high of fossil energy, given the increase in renewables.
Russia and Saudi Arabia: the winners
The result, for now, has rewarded the bet of the two key oil countries:Saudi Arabia, the only nation that could alone fill the gap between the hunger for crude oil (today, it is estimated, 3,3 million barrels are missing to satisfy demand) and current production; and, of course, the Russia which emerged victorious from the embargo challenge. Moscow, which has an average extraction cost of 12,8 dollars per barrel, has managed in recent months to supply oil to countries that do not practiceembargo, at a sacrificed price of around 30 dollars a barrel. But, informs Reuter, prices are also rising on the parallel market: theIndia, now the second largest customer of Russian crude oil, is currently paying 80 dollars for supplies of black gold.
The Saudi prince's plan
But the situation especially rewards Saudi Arabia which can count on an extraction cost of less than 10 dollars. mohammad bin salman he was thus able to start his pharaonic project of development on Red Sea which involves investments of more than 500 billion dollars. A titanic effort, including efforts to become a great sporting power, which, all things considered, Riyadh can only sustain with an oil price above 80 dollars. Beyond the economic aspects, however, the real news is geopolitical.
US-Saudi Arabia: the point of no return
Since 1945, Saudi Arabia has entrusted its security to Washington, guaranteeing in exchange an oil policy in line with US interests. But this pact yes it is now cracked. The prince, accused by Biden for themurder of the journalist Adnan Khashoggi, decided to free itself from US protection to choose an independent path, which led it to enter the Brics club and to practice a foreign policy without a pre-established cultural or ideological alignment. Hence the crude oil alliance with Russia and the opening towards China. How far can this turning point go? Mbs will feel independent only when he has a defense industry that emancipates him from the West. Therefore, among the programs for 2030 there is not only the football World Cup or the creation of an immense Las Vegas on the sea, but rather the objective of producing at least 50% of the weapons at home.
The real game is being played on nuclear energy
The USA recently issued a warning to the enterprising prince, canceling the agreement between Rtx (formerly Raytheon) and the Kingdom for a Patriot and Tomahawk missile factory, due to suspicion of possible collaboration with Russian companies. But the real game is played on nuclear. And here, in addition to the Chinese card, Mbs could aim for a revolutionary turning point: an axis with Israel. Anything is possible in the big oil game.
