Well now things are really getting interesting.
So I flubbed up yesterday and despite my best efforts to wake up at 4 a.m. to write a newsletter, I didn’t manage to send it out until 9 a.m. I will say this though, it was not on time, but gosh darnit, it was timely. According to the API, there was a meager 1.4 million barrel build in crude. Not that it’s all that shocking, but you knew Pedro was going to win after that dance Napoleon did. I gave a few reasons on why we may not see all those barrels come back and I’ll be the first to admit that I too thought they were just delayed from bad weather. More importantly, we now have to figure out what’s happening here. If the U.S. is not going to be taking more imports because A) we’re heading into refinery maintenance season or B) we are ready to just use our own supply in storage and find ways to produce more, the rest of the world’s oil producers are Barney. Like in rubble...Barney Rubble.
This has to be a huge red flag. One worse than your Tinder date wanting to go to see Fifty Shades Darker on your first meeting. No, after the International Energy Agency (IEA) proclaimed that the world is going to produce more and more, it’s a bad sign that oil prices outside of the U.S. are going to stay low and crush any hope of those producers ever making Government budgets for the next five years. This complicates those IEA statement because all they said was that oil producers are going to keep producing. There’s no forecasting of what’s going to happen to these countries that can’t survive on sub-$50-a-barrel oil, but that’s where the real risk is going forward. If the U.S. isn’t buying what they are making and we trim down the excess from here on in, we’re hitting the accelerator on the demise for several countries.
Just as an exercise of my dangerous mind, I’m presenting the teeming millions with some facts. Ready? Iraq, Libya, Venezuela, Algeria, Brunei, Kuwait, Azerbaijan. Care to make a guess? Well if you picked the Jeopardy column for “Countries with Oil Exports 90% or Greater of Total Exports”, you are a winner. Now let’s move on to these: Kuwait, Libya, Saudi Arabia, Iraq, Angola. Go ahead, take a shot. Hmm, close. Those are the countries that have more than 40% of their GDP tied to oil income. Now if you’re as shocked as I am that Nigeria didn’t even make either list, you are not the weakest link. What we have here are a bunch of countries that had to have been suffering through the past 18 months and shouldn’t be able to survive another six. I can’t talk enough about the eventual collapse and loss of Venezuelan crude oil, but throw in a few of these other countries and now the game is on. If you were wondering what was talked about when the Saudis met with Russia, I can only imagine they were giggling and wringing their hands across the OPEC map like two kids about to crush the board in a game of Risk. If and when the dust settles on what could be a year of economic disaster, there will be three new superpowers in this world; the U.S., Russia and Saudi Arabia. Tony Montana almost had it right, “First you get the oil, then you get the money, then you get the POWER!