1. Thread: the decision of Saudi Arabia to start a price was is probably the worst decision they made because they really did not understand the implications of their actions.
#OOTT
#OOTT
2. First they failed to realise that Trump and The Us had a floor to the price they were willing to accept oil. I believe Saudi thought a price war would please Trump as it brought down the price of gasoline. Huge mistake as can be seen by their back tracking.
3. It showed that Saudi maybe the biggest producer and with the most spare capacity but the swing producer is the USA not because of shale but because they can make Saudi increase and cut their production.
4. All the Saudi actions since of forcing compliance is the reaction to the bully being bullied. I am surprised countries like Nigeria have gone along with the cuts knowing the Saudis could not punish them.
5. To put this in perspective. Saudi started the Price war as way to increase market share particularly from the US. But it has backfired spectacularly. US exports have likely remained above 3mbpd around the same as before COVID-19. Saudi production has fallen more than 2mbpd
6. It means that outside the US, Saudi market share has fallen compared to the US which was really not what they were after doing when they started the price war.
7. Their actions have left the market completely unbalanced and it is hurting their customers refinery margins.They have left the market unbalanced between too much light sweet crude and too little medium/heavy sour crude.
8. This can be seen with extremely low refinery utilization while at the same time record differentials for Crudes like Urals.
9. Saudi talked this week about being the last and biggest producer. It shows they do not understand Geopolitics. They forget customers buy from producers they trust. After the last 3 months, Saudi have lost a lot of trust. Their assumptions like the price war maybe very wrong
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