Harvey Makes Landfall in Saudi Arabia, Muddying Waters: Gadfly

Harvey Makes Landfall in Saudi Arabia, Muddying Waters: Gadfly
Saudi Arabia has explicitly targeted the US in its strategy to drain the crude oil glut.

Little-Known Secondary Function of Weekly U.S. Oil Inventory Data

Saudi Arabian Banner Ad

The sum total of this is that, at least for the next few weeks, those inventory reports are going to be all over the map. Harvey just switched off Saudi Arabia's banner ad.

Moreover, most of that idle refining capacity is the target market for those heavier grades of crude oil -- and that includes Saudi Arabian Oil Co.'s own giant refinery in Port Arthur. So Harvey has messed with that element of the strategy, too.

And finally, the build-up of crude oil awaiting refining has blunted, at least for now, a third prong of the strategy: flipping the shape of the oil futures curve (see this for an explanation of fun things like "backwardation" and "contango"). The short story is that Saudi Arabia would dearly love to see the curve flip into a downward slope, raising its own revenue and making it hard for rival shale producers to hedge their future output. After some progress on this front, Harvey has also stepped in:

The specter haunting the whole approach of Saudi Arabia and its partners is that their old playbook just isn't suited to a more competitive and complex oil market. Harvey presents another wildcard.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

To contact the author of this story: Liam Denning in New York at ldenning1@bloomberg.net.

To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.


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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Asad  |  September 05, 2017
Say what you like to feel good, but reality is Harvey came as a blessing for Oil prices/industry. Complication or no complication. Period.


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