Hayman Capital Management, Kyle Bass Warns “The Saudis Are Sending The U.S. A 50M Barrel Oil Bomb;” Saudi Arabia And Russia Want To Kill The U.S. Shale Industry And Rob The U.S. Of Its Energy Independence – “Saudi Arabia Has Gone Nuclear”
Many ot the top oil analysts think that the recent Saudi/Russia oil spat had one major objective in mind — kill the U.S. shale industry and cripple America’s oil producing capacity — in order to once again put the U.S. in a vulnerable energy position. A major reason for the collapse in oil prices can be traced to both Moscow’s and Riyadh’s decision last month to significantly increase production, even while the global economy was going into hibernation. Before the COVID-19 outbreak, global oil consumption amounted to 100M barrels per day. According to the U.S. Department of Energy’s EIA Report released today/April 22, 2020, global oil consumption has dropped by 31M barrels per day — yet Russia and Saudia Arabia are keeping their foot to the pedal (pun intended) with respect to production. As a result, their is a gargantuan over-supply that is so massive, there is an estimated 250M barrels of oil floating offshore, and little if any storage capacity left. Indeed, it was costing about $25K per day in February of this year to store oil on a supertanker. That fee balooned to a staggering $300K per day last week before retreating back to +$100K per day.
Yet, despite record levels of productiion and over-capacity, Saudi Arabia is “sending the U.S. a 50M barrel oil bomb,” says Heyman Capital Management’s Kyle Bass. As Tyler Druden noted on his blog, ZeroHedge.com today/April 22, “the 50M barrels of oil from Saudi Arabia are scheduled to arrive to the U.S. in the coming weeks. Shipping data shows that more than 20 supertankers — each capable of carrying more than 2M barrels of oil — are enroute to key U.S. terminals, especially the U.S. Gulf. Three separate supertankers, also chartered by Saudi Arabia, are currently anchored off U.S. Gulf ports.”
Mr. Bass asserts that “the Saudis and the Russians have declared war against the U.S. shale industry. It seems they weren’t happy with U.S energy independence. Storage full…largest glut in history….Saudis are sending us a 50M barrel oil bomb. How negative will crude go in June?,” Mr. Bass asked. FYI, the 50M barrel oil armada is over half the size of the U.S. Strategic Petroleum Reserve.
Make no mistake, this is a national security issue; and, the U.S. will regret it if we were to lose our energy independence — and, once again be at the mercy of Riyadh, Moscow, and Tehran. And, Mr. Bass is no outlyier in his views.
Daniel Yergin, Vice Chair Of IHS Markit and author of several books, including the Pulitzer Prize for “The Prize: The Epic Quest For Oil, Money, And Power,”was interviewed/March 9, on CNBC to get his thoughts/observations on the selloff in oil and Saudi Arabia’s decision to increase production. Mr. Yergin told CNBC that “this could effect U.S./Saudi relations as we’re going to see a freezing up of the U.S. oil sector. This is a triple whammy Mr. Yergin said: Oil, geopolitics, and the coronavirus.” He believes the Russians took a view, with the virus spreading, there was going to be a drop-off in demand, and Moscow really detests the U.S. shale industry and did not want to go along with OPEC’s proposed cut in production.” Russia wants to bury the U.S. shale sector. Apparently so does Mohammed bin Salman. With respect to the U.S. shale sector, Mr. Yergin said, “We’re going to see bankrupticies, we’re going to see others, gasping for oxygyen, and others just hoping to survive. U.S. production is likely to be notably less a year from now, if this situation persists for an extended period, he said, adding that Russia wants to be number one -in the world, producing +11M barrels per day.”
Again Capital’s John Kilduff, who is also a CNBC Contributer told the network this week that Saudi Arabia’s objective is to cripple the U.S. shale industry and break U.S. energy independence. The Saudi’s “have gone nuclear here,” and “have done everything in their power to force the price of oil lower.” If Saudi were to be successful, Mr. Kilduff warns it could take the U.S. years to recover its former status as the leading producer of oil. A, Mr. Kilduff fears.
Mr. Kilduff called the Saudi’s shipping 50M barrel oil to the U.S. “is a dagger in the heat of the U.S. shale industry and the Permian Basin. If the U.S. economy is in recovery mode this time next year; but, our oil industry is crippled — then expect Saudi to cut production and drive up the price of oil. And restaring U.S. production is not something that can be done in a short period of time; and, could take years. U.S. rig count is down 50 percent from last July and U.S. production is also down a million barrels or more, according to the U.S. Department of Energy. “Instead of sending us 50M barrels of oil, Saudi Arabia will be withholding it,” and sticking it to U.S. consumers,” Mr. Kilduff said.
In addition to the ‘war on COVID-19,’ it is clear that Saudi Arabia and Russia have declared an oil war on the United States. RCP, fortunascorner.com