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To: The Ox who wrote (35897)	1/27/1999 12:43:00 AM
From: The Ox	Read Replies (1) \| Respond to of 95453

A picture is worth a thousand words: 207.95.154.130

To: The Ox who wrote (35897)	1/27/1999 8:40:00 AM
From: SliderOnTheBlack	Read Replies (3) \| Respond to of 95453

re: Saudi Arabia's agenda ? Very, very complex scenario here. While the conclusion that the Saudi's wish to bring other Global producers to their knees with $8 crude in an effort to recoup market share on the surface seems to be a logical answer; I don't think this is the case. First; while Saudi Arabia does have the lowest lifting cost of any producer; their ''true'' cost is NOT and can NOT be judged on purely production/lifting costs. The single best review of the situation that I have read, correctly pointed out that Saudi Arabia's true ''cost'' is much, much higher because such an incredible amount of their huge social welfare economy and budget is dependant on crude prices remaining above $16-18. Saudi Arabia has economically been brought to its knees here. They are in a tenuous situation socially as they have had to dramatically cut social and governmental programs. Social unrest and the political ramifications of lower crude revenues are way too costly and much too dangerous for ''any'' plan of an Crude Oil Price War to be even a remote possibility.There is truth to the rumours that the Saudi's are in dire fiscal straits; they have a budget crisis. They , like all OPEC members have vastly overstated their Oil reserves, as common sense and greed dictated as much; since OPEC production quotas are based upon percentages of proved reserves... literally the double edged sword here. No; the Saudi's are NOT pleased with current Oil prices and they can NOT afford the social, political, or financial costs envolved with a Crude Price/Market Share War. In my opinion, the USA's stance on letting Iraq return production to prior quota levels is an effort to twist the arm of the Saudi's since they garnered most of Iraq's production level. While low crude prices are a necessity to the reflation of Global Economies under the guidance & stewardship of Greenspan, Rubin & Co. - Crude prices are teetering on a dangerous fine line of bankrupting crude producing nations. I would think some very interesting micro-managing to levels of $14-16 are underway. Bill Richardson's trip to Saudi Arabia is a major positive sign. I see Saudi's move to let the majors return is in essence their ''seeing the light'' in an effort to maximize returns in a future enviroment of lower production quota's and not an open spigot crude price/production war. Only time will tell; however Crude prices can NOT be sustained at these levels. It is reallly just that simple. Only the timeframe remains in question here. Historically low Crude prices in turn lead to historic production cuts and Cap Ex spending cuts. Low prices lead to low production; and in an enviroment of this ''slowing rate of demand growth'' ( NOT - ''any'' actual decrease in Global demand) it is simply a mathematical equation to where and when supply and demand reach ''market equilibrium.'' The ''time'' factors are driven by how soon Asian and especially Japanese demand returns to normal levels, how strong OPEC adheres to present compliance in current production cuts; and most importantly if OPEC agrees to new, further production cuts. IMHO; we all ready know the end result; it is only the timeframe that remains unanswered... Personally; I'm betting that the US will apply adequate pressure on Saudi Arabia to institute new additional cuts, also that Japan will recover quicker and stronger than the market anticipates (allthough this is NOT going to be an overnight process); and most importantly that Greenspan and 'the New World Order'' , will manage crude prices upward in an effort to alleviate the Crude Producing Nations precarious economic positions. Sure seems to be a Tom Clancy novel here imho...