Not Looking Great for OPEC & Co

The complexities of the internal politics of OPEC leave me reeling, but they won't get any less fraught with this as the backdrop.

Yes, the great effort to sustain $55 looks to have failed comprehensively, and US shale production storms ahead anyway. 

$45 it is, then, which looks like serious trouble ahead, from Nigeria to Saudi to Moscow.  Economic migrants?  We ain't seen nothing yet.  One that saddens me is the hard times that have befallen Oman, my favourite Gulf state, a country I keep up-to-date with in an occasional way.   It's a benign little regime, and used to be able to afford all manner of nice civilities: but all that largesse had to come from somewhere.

Yes, casualties aplenty and worse to come, no doubt.  As noted before, perhaps $100 oil was the 'tax' we paid to keep everyone happy.

ND

Oil Price: More Than Just a Glut

Even as a consumer (with an augmented short-oil position), I find it hard to be insouciant about oil prices as low as this.  Something's gonna give.   Politically, economically, socially, all three ...   Saudi, Russia, Nigeria, all three ...

Then there's Shell and its BG gambit.  Trying to emulate John Browne's BP (1998) by cleverly buying assets at the bottom?  A hopelessly mis-timed play.

(Incidentally, in moving on gas-heavy BG they were doubling-up on their already humungous mistake of pouring $$$ into Qatar LNG, which Shell insiders swear they never would have done if they'd seen this coming ...)

Then, there are the legions of very nasty people who've made their 'livings' from quietly skimming off oil profits (which ain't too difficult @ $120, but altogether harder just now).  A bit like when drug dealers can't deal drugs any more, they will be looking for the next source of ill-gotten $$$: and what, do we think, might that be?  We won't enjoy it, whatever it is - because it's our money either way.

'Interesting times' doesn't get close.

ND

The Price of Oil: Altered Perspectives

Whenever commodity prices slump I have been inclined to retort:  (a) "if in doubt, go short" - the old Enron trading motto - because there's always more stuff out there than most people realise;  and (b) well these days, just like GB as a whole I'm a big net consumer, so it suits me just fine.

Flippant stuff, eh?  But there's no backing off the wisdom of the first of those.  Extraction technology always gets better, and there is just so, so much stuff.

Hands Up!

As for the second, that basic 'consumer' situation is unlikely to change.  But does it suit me to have commodity prices so low?  Returning from W.Africa, at $50 oil I see the Nigerian situation getting more and more dire by the month.  For ever increasing numbers of Nigerians the solution will be to hit the emigration trail.  There are nearly 180m of them.  They speak English ...

It's clear enough, based on fundamentals the price of oil should never have stayed long above $100.  At those levels it was a tax on the oil consumers of the world, levied enthusiastically by OPEC, Russia et al: and likewise the metals producers etc.  The producer-nations have become pretty hooked on these 'taxes', and look at the roll-call.  How many of them can fall back for long on their reserves and SWF's?  Even the Aussies will be decamping soon  -  and they speak English, too (sort-of).  I've often described capitalism + open markets as the most effective means of allowing arbitrage to resolve inefficiencies and imbalances ...

This isn't the only large-scale wealth-transfer event on the horizon.  At the ghastly green Paris-Climat jamboree in the run-up to Christmas the third world will be demanding the West pays for 'climate change' - in hard cash, straight into their leaders' pockets.  And M. Hollande seems minded to gratify them.

So: with the demographic tectonics on the move, how do I want to pay my tax - in higher prices and direct cash transfers, or in economic migration?  If there was any choice it would be an interesting dilemma.

ND

Afren Non-Shock - Rilwanu Lukman dies and then the stories come out.

Afren has had to suspend its CEO on account of 'unauthroised payments' - this is taking bribes to us more ordinary folk.

Afren Plc is a large listed UK company which was worth about £1.7 billion. On the high risk side though, given that its operational subsidiaries are almost entirely in Nigeria and also in Kurdistan. It makes my old favourite GKP look like a widows and orphans investment by comparison.

The company has a challenging history one of the key founders was Rilwanu Lukman, known for being the Head of OPEC and also Nigerian Oil minister. Suffice to say he followed Dr Subroto of Indonesia into the OPEC job. His reputation is somewhat colourful, a nice edit to Wiki does this no justice. Wikileaks perhaps does a better job.

Poor Mr. Luckman died last week. He only ever had a 3% holding in Afren and brought in Osman Shahenshah to be the front many CEO for the company, likely because they wanted plenty of Western institutions as their investors which would have been difficult with Lukman as the CEO.

With Lukman dying, there are plenty of knives out in Nigeria and so perhaps it should not be that surprising that an internal investigation has quickly revealed payments to Shahenshah and meant that he has been suspended.

It's a murky world in Nigerian oil to say the least!