Saudi Arabia Cuts Oil Output, Export: Industry Report

Originally posted by xuenchen

Originally posted by boncho
reply to post by xuenchen

 

Hi circle, meet your argument.

So they have to pay more for their imports if imported goods costs go up? Yes/no?

The profits are more than the expenses from general price increases on goods and materials.

And they still get more profit from direct oil sales.

This is why they have amassed all that wealth.

Do you want to back that with stats and figures now, because this is running downhill. Perhaps we can start backing our statements. Myself included.

reply to post by boncho


do you really think there is no feasible way for them to profit off this type of manipulation?

your one of the most annoying people to come across here on ATS. You seem to enjoy arguing just for the sake of arguing.

reply to post by boncho


One example of Saudi "investment" of profits could be this:

Dow Chemical Company (NYSE: DOW), the Midland, Michigan-based diversified manufacturer and supplier of products used mainly as raw materials in the manufacture of consumer products, today announced the official formation of Sadar Chemical Company. Sadara Chemical is a joint venture between Dow Chemical and Saudi Arabian oil company Saudi Aramco.

Dow and Saudi Aramco also announced the Board of Directors and seniors officers of Sadara Chemical. The two companies said that the Sadara Board includes eight members, with Abullatif A. Al-Othman acting as Board Chairman. Al-Othman is the Senior Vice President and Engineering and Project Management at Saudi Aramco. Dow’s Senior Vice President, James D. Mcllvenny will serve as deputy Chairman of the Board.

Dow Chemical and Saudi Aramco Announce Official Formation of Sadara Chemical Company


I would think that if all profits were nullified by price increases, neither company could ever re-invest.

The profits from the new company could help against price increases.



here is a Saudi Holding company:

Strategy & Objectives
Many of the surplus oil revenues are invested in low-risk assets, such as sovereign debt instruments.

Governance
The resources are managed by the Saudi Arabian Monetary Agency (SAMA).

SAMA

Some more Saudi holding companies:

Kingdom Holding Company (Arabic: شركة المملكة القابضة‎) is a public holding company headquartered in Kingdom Centre in Riyadh, Saudi Arabia, and is the largest company in Saudi Arabia.[1] It is controlled by Prince Alwaleed Bin Talal Bin Abdulaziz, and is headquartered in the city of Riyadh. The company is publicly listed in the Saudi Stock Exchange, but only 6% of the shares are public, the remaining 94% being owned by Prince Alwaleed.[2][3]

The company describes itself as a diversified investment company, whose interests include banking, real estate, telecommunications, broadcasting and media, entertainment, hospitality, computers and electronics, agriculture, restaurants, upscale fashion, retailing, supermarkets, tourism, travel and automotive manufacturing.

Its international investments include (or have included)
Amazon
AOL/Time Warner
Apple Inc.
Canary Wharf
Citigroup
Coca Cola
......many more listed

Kingdom Holding Company


Google Saudi holding companies



The Saudi and other oil nations have private holding companies that do the trading in commodities.

Hard to get direct info. They go by many hidden names and have many international agents.

but this one is a possibility: Aljomaih Holding Company

Major Shareholders
Includes names and holding % of shareholders that own 5% or more in addition to strategic shareholders.

Subsidiaries, Investments, and Related Entities
Includes the company's subsidiaries, direct investments, funds, developments and projects that the company owns or co-owns. Also includes other related entities such as sister companies, companies under management, etc.

Originally posted by VonDoomen
reply to post by boncho

 

do you really think there is no feasible way for them to profit off this type of manipulation?

your one of the most annoying people to come across here on ATS. You seem to enjoy arguing just for the sake of arguing.

And you seem to be lapping up articles by the media for what reason?

reply to post by xuenchen

The petroleum sector accounts for roughly 80% of budget revenues, 45% of GDP

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$434.67 Billion US dollars at current prices

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With these numbers we can discern that roughly 204 billion dollars comes from petroleum sold in Saudi Arabia (45% GDP)

Saudi Customs revealed that the total value of imported goods to the country in 2010 increased by 12% from 2009 to reach SAR 400.8 billion (US$107 billion)

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107 Billion is spent on imports. Now that is half of the petro revenue, or a quarter of the country's GDP. The higher the cost of the imports, the more money that is spent on them. The higher the crude oil cost, the higher manufacturing costs around the world become.

Whether or not the country is investing some of their oil profits, they still have to pay for there imports from somewhere. And we are talking about paying a bill, something to the tune of half the oil revenue.

Given that the oil revenue makes up 45% of the GDP and 80% of budget revenues, I think cost of imports affects the country dearly.

But hey, oil is through the roof, they should be rolling in dough right?

Well, it's not the first time oil went up:

Due to the fall in the Kingdom's oil export revenues in response to an over supply in the international oil markets, Saudi Arabia has been faced with the problem of a current account deficit since the mid 1980s. The balance of payments’ current account deficit during the period 1986-1989 were SR-43 billion (U.S. $11.5 billion), SR-36.6 billion (U.S. $9.8 billion), SR-27.5 billion (U.S. $7.3 billion), and SR-35.7 billion (U.S. $9.5 billion) respectively.

The Desert Storm war, coming at the start of the fifth development plan (1990-1994), had contradictory effects on the Kingdom’s foreign trade and balance of payments. The sharp increase in the value of oil exports at the start of the fifth plan period resulted in an average annual trade balance surplus of SR75.1 billion (about U.S. $20.00 billion) during the period from 1990 to 1993 (see table 11). On the other hand, The substantial cost of the war and the immense outflow of related payments had a substantial negative impact on the overall balance of payments' position. Thus, as table (15) shows, the average annual current account deficits during the years 1990 to 1993 were SR15,6 billion (U.S. $4.2 billion), SR103.3 billion (U.S.27.5 billion), SR78.1 billion (U.S. $20.8 billion) and SR54.7 billion (U.S. $14.6 billion) respectively.

Source















But forgive me: I will jump into the kneejerk reactions that you guys are having. "Damn the Saudis!" Money grubbing oil cartel that they are! Damn them all to hell.

Forgive me for reading an article and noticing that it's trying to convey a message. The Saudi's might be reaping in large profits today, but it doesn't predict what will happen tomorrow.

And this thread, surely doesn't come close to touching the complexity of a global market that is built on oil.

Maybe, just maybe we should reread the CNBC article and look for a hint of something:

Together with other Gulf oil exporters, the UAE has been in focus as a possible source of alternative supply for at least some of Iran’s crude. Widening sanctions have seen several Asian clients of Iran’s oil, including top importer China, send high-level delegations to the region in the last few weeks.

Alternative supply for Iran? You mean... There are issues with Iran's oil right now?

Hmm...

It's almost as someone wanted oil to tighten up while this whole Middle East chess game is being played. But that's nuts right. I mean...

Heck,

You could go almost as far to say that's a conspiracy..



And CNBC didn't talk anything about that...

reply to post by xuenchen


I think what I was trying to get across is that Saudi's economy is so heavily reliant on oil revenue that a price gain in crude is not as good as it looks from the outside.

Are they manipulating the price to see increased profit. Most likely yes, as they predicted a deficit last year but ended up with a surplus. And they are doing the same for next year.

Saudi Arabia predicts a budget deficit of 40 billion riyals ($10.7 billion) next year as the Arab world’s largest economy invests to create jobs and reduce its dependence on oil.

The government expects to spend 580 billion riyals, 7 percent less than this year, the Riyadh-based Finance Ministry said on its website today. Revenue is expected to fall 26 percent to 540 billion riyals.

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Will those profits mean anything long term? History shows that the economy is volatile because of how heavily dependent they are on oil revenue. So a dollar today does not = ten dollars tomorrow.

Is there more to the situation than the news is covering? I do believe so.

Ca ching.

of course...obama will be blamed...just like he is for everything else.

Obama cut oil Output from his country?

Originally posted by mastahunta
Obama cut oil Output from his country?

Didn't we export more than we imported in 11? To me this says stop importing and supply our own oil.

reply to post by boncho


I have no idea what you are talking about.. Lapping up articles again. Do you know me you troll? No you do not.

Secondly, your completely missing a point. As usual

Saudi aramco is the state owned saudi oil company.GDP per capita soared by 1,858% in the 1970s (although that growth was concentrated with the ruling elite)

Trade (2010 est.): Exports--$235.3 billion: petroleum and petroleum products. Imports--$99.17 billion.

So they obviously import less than they export. Secondly, the state of saudi arabia does not do 100% of the importing. The private sector import things as well. Meaning this hidden tax gets transferred to the private sector
As well. Since 1983, saudi arabian imports have been decreasing vs gpd. Imports have become much less important to saudis due to self sufficiency and import substitution.

"Saudi sought to reduce government spending while generating growth in the private sector . Joint ventures were encouraged between foreign companies and Saudi state enterprises in the hope of increasing foreign investment. The role of the private sector grew during this time, rising to 70 percent of non-oil GDP by 1987"

These are just some of the things i found with some quick research.
So yes, saudi arabia could make money by manipulating the oil market. I dont even understand how you have a hard time understanding that.

You guys are insane to think that the Saudi's would hold the world ransom in it's current state. This isn't manipulation going on, this is reality folks.

Peak oil is being realized in real time, and we're all scrambling for resources to keep this party going a few additional years.

Governments are in full throttle brainwashing people into fighting "the enemy", economies are falsely propped up, and the great war is soon to commence.

We had warning that Saudi Arabia's reserves were in sharp decline, overstated, etc... years ago. It doesn't follow the predicted bell curve of available extraction. It's a sharp decline, and you have to use a lot of energy intensive high tech to keep the wells economically viable. The EROEI has been dropping for decades.

This is reality.

This one fact just makes me laugh....................ROLFMAO
Think about it folks, the magnitude of the scam is breathtaking!
We in the west, since WW2, have managed to convince the entire world, that trading their resources and gold, their oil, and their labour, for worthless hunks of prttily printed paper!
Dont you get it?
The BIG PONZI is shutting down!
Like we always said it would!
How many times have yu heard some news that made you just shake your head in a kind of puzzlement?
Yep you were right!
It never did make any sense! they bamboozled the whole freakin world!
All that worthless debt paper will be TOTALLY UN COLLECTABLE!
NOT JUST GREEK!
Everyones!
wait and see, it wont be that long now.....shes going bust big time....
IT all depends upon GROWTH!

NO GROWTH NO ECONOMY!

It folds like a house of cards or shell game as soon as the growth stops for a period of time.....
PLace yer financial head between yer knees and kiss yer 401K goodbyeeeee!

reply to post by boncho


I understand the links between imports/exports and how it affects economies.

But i am talking about "private" investing.

An example is the U.S. is in debt $15 trillion.

But that's "the government".

The people in the government are not broke as we know the members of Congress invest on possible insider information.

The Saudis invest as individuals as well as private companies set up by the "individuals".

They use option trading to make the extra money.

Stocks vs Options
So, you ask, what are the significant advantages of online options trading over stock trading?

Well, let's start with returns. Financial returns can be so much more rewarding with options. Take the example below, for the time being assuming there's no commission charges.

Stock ABC is valued at $50 and you invest $1000, therefore 20 shares. The next day it reaches $51 and you cash out. Your profit is only $20, or 2%.
$51 - $50 = $1
$1 x 20 shares = $20
$20 / $1000 = 2%


Now, let's say you bought the option for ABC, call it .ABCKL, for $5 per contract, and you invested $1000, so 200 options. Say the delta is .99. If ABC went up $1 the next day, .ABCKL would be worth $5.99 per option, a return of about 20%.

$5.99 - $5.00 = $.99
$.99 x 200 options = $198
$198 / $1000 = 19.8%


So which would you rather have: 2% or a whopping 20%? And think about this as well: ABC only went up $1 in one day, not unreasonable. But by buying the option instead of the stock, you would have returned 20% in just one day because the stock went up only $1!! Many investors don't even return 20% in one year!

Options trading

Now, if they (The Saudis or anybody else) knows ahead of time when a price increase or decrease will happen,
it would make sense that they could easily make money from options trading

This is how they have been doing it. They create the shortages and surpluses. They "invest" in the options prior to the actual "announcements".


And the above explanation is actually conservative.
Many times, the profits get into the hundreds and thousands of %.

The commodity markets have similar techniques on their exchanges.

The profits from these trades have nothing to do with the "government" in most cases.
(although governments can and do trade options and futures contracts)

Very complicated, but the professionals do this everyday.


Option (finance)

reply to post by xuenchen


I know what you are talking about and where you are coming from. I looked at Saudi Arabia for 2009, oil price was up around 20% that year while import cost left them paying I think around 12% more.


Still, a kneejerk reaction is a kneejerk reaction. Railing against Saudi for cutting doesn't make any sense, when they are not the only oil producing country in the world.

Nigeria, Venezuela and Iraq raised crude oil exports in December from a month earlier while other OPEC (OPCRTOTL) members including Saudi Arabia decreased shipments, according to the Joint Organization Data Initiative.

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The trading you are talking about has less to do with actual production and supply, than it does the market for oil. And the Saudis are not the only ones playing in the market. Therefore they are not solely responsible for an oil price increase.

reply to post by boncho

Saudi Arabia has dramatically shifted gears by cutting crude production, even as oil bounced around near 30-month highs, to guard against a sudden price slump caused by slowing global demand.

Despite the Saudi move, oil prices fell sharply on Monday as traders focused on the prospects of sputtering demand, given China’s effort to curb inflation and new warnings about U.S. deficit problems.

Ministers from the Organization of Petroleum Exporting Countries insisted Monday that the global market is well-supplied with crude oil, and blamed political and market factors for the steep runup in crude prices this year.

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reply to post by VonDoomen

So yes, saudi arabia could make money by manipulating the oil market. I dont even understand how you have a hard time understanding that.

I think you missed it. I was asking how exactly were they doing it, and how much did they stand to gain. Higher prices does not always mean higher profit (long term). When you have a large supply, or are a large supplier, lower prices sometimes = more profit, in the long run.

I was just wondering how beneficial it was for the Saudis to be seeking out higher oil price right now. And I wasn't fond of the CNBC article that makes it seem like Saudi is the only country in the world involved in oil, or was that the kneejerk reactions in the thread?

Saudi Prince Al-Waleed bin Talal said Sunday that he wants oil prices to drop so that the United States and Europe don't accelerate efforts to wean themselves off his country's supply.

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Saudi Arabia deals well with low oil prices


Saudi economy set to shrink by 0.9 percent this year
The outlook for the region’s largest economy, Saudi Arabia, will “remain broadly positive” despite the ongoing economic downturn, according to an International Monetary Fund executive board report released last month. The IMF expects the Saudi Economy to contract by 0.9 percent this year, down from a 4.2 percent growth in 2008, because of lower oil prices.

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reply to post by buster2010

Didn't we export more than we imported in 11? To me this says stop importing and supply our own oil.

Oil companies would never go for that. We'd have to nationalize our oil...then we'd hear screams of Obama the marxist socialist communist.

So instead, we'll just keep getting raped at the pump.

reply to post by boncho


Saudi has more leverage with lower oil prices.

I wanted people to look at the bigger picture with my posts, Saudi is one of the few oil producing countries that can do quite well during low oil prices, and not only that, but they hurt some of the competing OPEC nations.

Anything they do though, is an extension of US interest, for the most part, given that they are so closely tied with the West.