Gassed - Completely agree. There are a number of countries (the Saudis included) that need high oil prices to balance their books. The Saudis need oil at around $100 p/b, otherwise their social-welfare state will be in trouble. In addition, the Saudis have around $800bn in reserves and can weather this decrease for only so long. They want to regain lost market share that they've gradually lost over recent years to Iran and Russia. They've got more reserves than their regional competition - but eventually that will run out.
The way I see it, there are two objectives for the Saudis. Firstly, regain market share and reestablish themselves as the senior regional oil producer. Secondly, inflict economic pressure on the Iranians and Russians to counter their influence in the region. I personally believe the latter is the immediate concern. The Saudis didnt just wake up one day and think 'let's let the market decide the oil price', there's a motive.
What does this mean for we investors? Personally, I'm waiting for the snap back northwards. Supply will eventually retreat as investment in future developments dries up and demand continues to increase. The world's population isn't getting any smaller and this cheap oil will only fuel their appetite.
This is all in the medium/long term and just my opinion. I think this will all pass. Probably like a kidney stone.
Cheerio,
sw3
SSN Price at posting:
1.2¢ Sentiment: None Disclosure: Not Held
AKK Price at posting:
4.0¢ Sentiment: Hold Disclosure: Held
