Ali Al-Naimi Sweats Bullets on CBS’s 60 Minutes

Do you know how how it is in the Saudi Arabian desert?

Hot. Really Hot.

Lesley Stahl spent some quality time Sunday night with the Saudi Arabian Minister of Petroleum and Mineral Resources, Ali Al-Naimi.

Naimi went to Lehigh and Stanford, so you won’t need a translator. But it is amazing to see what lengths they are going to extract oil from their massive Shaybah field....it is truly a marvel of engineering.

Al Naimi wants to see oil back at $75, and we will get there sooner or later, as new projects are shelved and the oil sands of Canada begin to shut down. Supply shock will lead to higher prices; don’t listen to me but maybe take Gregor’s word:

Oil for sale at 42.00 dollars. That’s practically free. My work suggests that as much as 9.00% of global oil production (using 74 Mb/day) is not economic at these levels. Not even close.  Even with the drops in materials and drilling costs. I see tiers starting at 90.00, showing how much oil goes off line as we travel down through 75, 60, and then to 45. We are already losing future production from Alberta. If we go into the 30’s, we will start to lose current production from Alberta. And that’s just one example......Oil at 42.00 dollars is a kind of de-stocking price, therefore. It’s what you’d pay someone who was simply looking to dump inventory. You certainly couldn’t contract for new oil at that price. Not from Alberta, not from ultra-deepwater, not even from selected North Sea areas. The volatility alone and tremendous price uncertainty makes 42.00 also a dis-incentive to produce new oil. If we settle out at this price over the next year, my view would be that global oil production will return to 2002 levels at around 67 Mb/day. Right around 9.00% lower than current supply. Gregor.us

If you pay attention to Goldman Sachs oil prices forecasts you will be roadkill. Bookmark Gregor’s site now, or else.

I expect it was like Superbowl Sunday at Gregor’s and Eric Bolling’s place tonight, pizza, chicken wings, the whole shooting match.

It was a double length segment, you can fast forward it if need be. Great piece though - more must see TV.

The Oil Kingdom - Part One

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Part Two

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If you don’t know the story of Saudi Aramco, check out this video. The history is quite fascinating, and of course Americans had a lot to do with developing the giant oil fields. Here is Mike Wallace’s Original 60 minutes piece from 1974:

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Ali Al-Naimi
Wikipedia

Good bye, petrodollars …
CFR Blog Setser
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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