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2008-10-27 Arabia

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Posted by tipper 2008-10-27 10:24|| || Front Page|| [9 views ] Top

#1 Much of the Gulf has budgeted for much lower oil prices. Gulf states, on average, need prices above $47 a barrel to keep from running budget deficits. But some states are more vulnerable than others: Bahrain's so-called break-even price is $75 a barrel, compared with Saudi Arabia's $49 and Kuwait's $33, according to the International Monetary Fund.

The speed of crude's tumble -- to about $64 a barrel -- has unnerved officials despite the apparent cushion. At an emergency meeting on Friday, the Organization of Petroleum Exporting Countries hastily decided to cut output by 1.5 million barrels a day, the biggest single cut in almost eight years. After that move failed to curb crude's fall on Friday, some oil officials suggested over the weekend that another cut was in order.

Weeks of sliding equity prices have wiped out billions of dollars of wealth for the region's influential clique of local retail investors. Saudi Arabia's main stock-market index is down by more than 50% year to date. The fall has wiped some $205 billion of value off the region's biggest exchange by market capitalization since June.

Posted by KBK 2008-10-27 11:17|| 2008-10-27 11:17|| Front Page Top

#2 These are different 'break-even' prices than those I saw in an article a week or so ago, on this site I think. I tracked down a link to the IMF statement;
http://www.recexpo.com/recweb/News_show_news.asp?id=4139
I am suspicious of the numbers, and the main driver for my suspicions is the source of the data, the IMF. The IMF is not a clean-hands player in all of this. I will try to track down the earlier article when I get time; I recall SA's break-even being around $10. Big difference.

Posted by Whiskey Mike 2008-10-27 13:03|| 2008-10-27 13:03|| Front Page Top

#3 That's the governments' budget break even figures. I seem to remember is costs the Saudis around $4 to lift out of the ground, transport, clean and load onto tankers 1 barrel of oil.

Posted by ed 2008-10-27 13:44|| 2008-10-27 13:44|| Front Page Top

#4 Some interesting oil industry statistics
"Production cost" includes a world-wide average of US $7.35 per barrel in finding costs, $3.57 per barrel in lifting cost (what it takes to operate a producing well), and $1.00 in production taxes per barrel. 2003 numbers from EIA.

That's a worldwide average of $12/barrel in 2003.

Posted by ed 2008-10-27 13:48|| 2008-10-27 13:48|| Front Page Top

#5 break-even means different things to different people

it could mean "production + operations + maintenance"

or it could mean "production + operation + maintenance + required govt. rake off"

Posted by mhw 2008-10-27 14:18|| 2008-10-27 14:18|| Front Page Top

#6 The Canadian oil sands are break-even at $28 per barrel, *after* factoring in mandatory royalties, and that's about as expensive a type of oil as you might get. I expect that if you subtract those royalties, break-even point is either in the high teens or low twenties. The cash cost of the marginal barrel of oil is nowhere near $60 a barrel. And that marginal barrel of oil only needs to get produced if oil demand stays the same. US oil demand plunged 4m barrels a day (out of 20m) during the 1980's recession. This recession will be far worse. I expect a drop in demand of 10m barrels a day. OPEC is screwed. I'm looking for oil in the 20's before this bottoms out. That's where it was in the 2001-2002 time frame.

Posted by Zhang Fei 2008-10-27 17:37|| http://timurileng.blogspot.com]">[http://timurileng.blogspot.com] 2008-10-27 17:37|| Front Page Top

#7 That drop of 10m barrels I projected is of total world demand.

Posted by Zhang Fei 2008-10-27 17:38|| http://timurileng.blogspot.com]">[http://timurileng.blogspot.com] 2008-10-27 17:38|| Front Page Top

#8 Euro government budgets are going to see some pain because of this recession. A huge drop in gasoline demand will make a dent in their budgets, since they rely on it - partly - to pay for "free" health care.

Posted by Zhang Fei 2008-10-27 17:47|| http://timurileng.blogspot.com]">[http://timurileng.blogspot.com] 2008-10-27 17:47|| Front Page Top

#9 Just make sure those who bought oil futures pay the price they porked it up to. If they can't, they need to be banned for life from the commodities and trading markets as a minimum.

Posted by Procopius2k 2008-10-27 18:15|| 2008-10-27 18:15|| Front Page Top

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