Oil Price War and Liquidity Crisis Coming
Bloomberg reports Aramco Slashes Crude Pricing, Starting Oil War as OPEC Flops.
Saudi Arabia kicked off an all-out oil war on Saturday, slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in a bid to push as many barrels into the market as possible.
The cuts in monthly pricing by state producer Saudi Aramco are the first indication of how the Saudis will respond to the breakup of the alliance between OPEC and partners like Russia. The kingdom plans to accompany the price cuts with a hike in crude supply, according to people with knowledge of the situation.
What' Going On?
Saudi Arabia and Russia want to kill the US oil industry and frackers.
The Financial Times reported “Russia has had enough of the shale guys living off Opec-plus,” said one person familiar with negotiations, referring to the cartel and allied non-members.
Junk bonds would get crushed over this. And that will take the market with it.
“Angela [Merkel] you got to stop buying gas from Putin,” said Trump.
$36 at the Open Today?
We find out in about an hour.
Crude Collapses Since Start of Year: A Credit Implosion Up Next
On Friday (before the oil price war was official), I commented Crude Collapses Since Start of Year: A Credit Implosion Up Next
Credit Implosion Coming Up
A lot of leveraged drillers and crude suppliers dependent on prices above $50 will see a credit implosion.
That's just a start.
Supply and Demand Shock
As noted previously, a Very Deflationary Outcome Has Begun.
Blame the Fed.
Deflation is not really about prices. It's about the value of debt on the books of banks that cannot be paid back by zombie corporations and individuals.
See the previous link for discussion.
Liquidity Crisis in Energy Space
What better time than now to blow up US oil producers heavily in debt as an act of revenge?
The liquidity crisis will quickly spread far beyond energy.
Mike "Mish" Shedlock