Salient to Investors:

  • IEA said global oil demand growth in 2014 will be the weakest since 2011, as the US shale boom causes oil production from non-OPEC rises by the most since the 1980s. China will account for 11%, the US 21% of demand in 2014.
  • Mike Wittner at Societe Generale said we are swimming in crude and history shows the Saudis will do what is necessary to sustain prices above $100 a barrel – Brent may average $90 in Q4 if Saudi stops cutting.
  • Harry Tchilinguirian at BNP said Saudi will act to stabilize and sustain prices above $100 a barrels for their own self-interest and that of OPEC members in the Middle East, Iraq to battle the spread of IS in the north.
  • The median analyst expects Brent to average $107 in Q4 and $105 in 2015.
  • Julian Lee at Bloomberg News said Saudi will reduce production by a further 500,000 bpd in Q4.
  • There may be incentives for Saudi Arabia to let oil continue its decline, according to Bank of America Corp. and DNB ASA, Norway’s biggest bank.
  • Francisco Blanch at Bank of America said allowing Brent to fall below $85 could curtail the US shale boom as some producers would then lose money, which in turn would ensure continued U.S. reliance on Middle Eastern energy.
  • Torbjoern Kjus at DNB said Saudi has no need to manage prices above $90 – it benefits them to test where the limit is for US shale.
  • Energy Aspects said Saudi has the fiscal firepower to tolerate prices as low as $70 for 2 years without economic difficulty.
  • Seth Kleinman at Citigroup said Saudi should not just focus on price levels because of the significant oversupply and steep contango – the discount on immediate versus later deliveries, which encourages traders to stockpile crude, which can then return to the market outside of Saudi control and thwart their effort to stabilize prices.

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