This Is Why The Saudis Are Unlikely To Accept Any Production Cutback
‘Clack! cla-cla clack-clack clack-clack CLACK!!’ (today’s fanfare for Nonfarm Friday was played on football helmets to celebrate the start of college football season). It is the first Friday in September, which means we see official US employment data, aka nonfarm payrolls. Today’s report has showed 173,000 jobs were created in August, which was less than the expected 220,000, but has been offset by a drop in the unemployment rate to 5.1%. Given the market response, it believes this report is good enough to usher in an interest rate hike later in the month….and crude is heading lower.
Elsewhere in the world today, Russia’s Energy Minister has said that Russia and Venezuela have agreed to continue talks between OPEC and non-OPEC oil producers to try to come up with initiatives to stabilize oil prices. He did add, however, that the two countries are not necessarily pushing for a coordinated cut to support prices – because ‘no producing country is willing to reduce its output‘.
Saudi Arabia’s King Salman is set to meet President Obama at the White House today, and the below image highlights how far the US has come in terms of oil independence in the last decade or so. Back in 2003, the US relied on Saudi for 1.7 million barrels a day of imports, while pulling in 7.3mn bpd from other countries:
Related: Venezuela Delaying The Inevitable With $5 Billion From China
Fast forward 12 years and domestic production has risen by nearly 70% (h/t shale revolution), while both Saudi imports and imports on the whole continue to be marginalized:
From our #ClipperData, we can see imports from Saudi have held below 1mn bpd in recent months (EIA data above is lagged). Volumes have averaged 923,000 bpd in the first eight months of the year, highlighting that EIA data in the coming months will show Saudi volumes are still dropping:
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