Yemen War Reverses Direction…Houthis Drive Into Saudi Arabia

DAMASCUS, SYRIA (4:00 A.M.) – The Houthi forces continued their advance in the Najran region of southern Saudi Arabia on Monday, capturing two more military sites after a fierce battle with the Coalition fighters.

According to Yemen-based “Al-Masirah News Agency,” the Houthi frces and the Yemeni Republican Guard managed to overrun the Saudi Coalition’s defenses and establish control over two military installations on Monday.

Yemeni sources reported that scores of Saudi soldiers were killed in the operation which was carried out despite KSA air force’s attempts to hamper the advance of Yemen’s army and popular committees.

On Monday, the 48 hour long ceasefire in Yemen concluded, despite neither side abiding by the guidelines set forth in the agreement.

Advertisements

Saudis Admit Losing the Oil War To US Shale

[USGS Estimates 20 Billion Barrels of Oil in Texas’ Wolfcamp Shale Formation]

OPEC poised for output cut as Saudis bow to U.S. shale

financial-post

Saudi Arabia can no longer afford to fight a gruelling war of attrition to force rivals out of the market.

The OPEC cartel is poised to slash crude output after weeks of feverish shuttle diplomacy by Saudi Arabia, halting the “pump and dump” price war that has ravaged the oil industry for two years.

Officials from the cartel’s 14 member states will gather in Vienna today to start hammering out the final details of a deal to clear the enormous surplus hanging over the market.

OPEC talked themselves into a corner and they have to come away from Vienna with something

They have received quiet assurances from the Kremlin that Russia will play its part by freezing production.

“OPEC talked themselves into a corner and they have to come away from Vienna with something,” said David Fyfe, market chief at oil trader Gunvor.

“Prices could easily fall below US$40 again if this ends without a deal. They need to cut by at least 1 million barrels a day (b/d) to eat into inventories in early 2017. But it will be tricky: the Saudi red line is that they are not going to do this alone, and there must be some ‘buy-in’ from the others,” he said.

Yet any breakthrough will come as the U.S. Geological Survey reports vast quantities of cheap shale in the Wolfcamp pocket of the Permian Basin of West Texas, and US president-elect Donald Trump vows to slash costs for drillers and open federal land for exploration.

The Permian alone could rival the giant Ghawar oil field in Saudi Arabia, ultimately producing 6 million b/d at relatively low cost.

OPEC faces a Sisyphean task. It must learn to live with a permanent threat from agile frackers in North America, who are able to crank output within months at ever lower break-even costs, potentially capping global crude prices at half the level of the long boom years, which ended so brutally in 2014. Brent crude nudged up to US$46.80 last week on optimistic talk from OPEC ministers, though prices are still down 15 per cent since early October.

There have been hints of a loose agreement that lets Iran and Iraq curtail output slightly above current levels, leaving the Gulf states to do the heavy lifting.

“If they are highly disciplined and it doesn’t all fall apart as everybody cheats, prices could climb back up US$60 next year, but that is a very big if,” said Mr Fyfe.

Suspicions abound that several countries are inflating production figures to lock in a higher ceiling.

“Basically, there is going to be a deal,” said Ole Hansen from Saxo Bank. “Shale is now so lean and mean that OPEC can’t count on U.S. production falling. They’re only hurting themselves if they continue to pump and dump.”

OPEC reached a political accord in September to cut supply to a band of 32.5 million -33 million b/d, vowing to flesh out the details by Nov 30. Failure to do so would be the final nail in the coffin for the shattered credibility of the cartel.

Yet everything has gone the wrong way since then. OPEC produced a record 33.8 million b/d last month, and the immediate glut is getting worse. Shipments from Libya and Nigeria have together jumped by about 1 million b/d since mid-summer as attacks on oil infrastructure abate and ports return to business.

Iraq is reopening a pipeline in the Kirkuk area, and aims to boost output by another 300,000, insisting it should be exempt from cuts while it battles Islamic State of Iraq and the Levant (Isil).

Iran is back to pre-sanctions levels and is preparing to open three new fields with a further 200,000 b/d.

Twisting the knife deeper, the U.S. is still drilling extra wells. The latest Baker Hughes rig count rose by two to 452 last week.

Frackers have sold forward their production with hedge contracts, guaranteeing future supply whatever now happens. “They took advantage of the window for a few weeks when oil was higher and locked in hedges of around $52 for 2017, and $55 for 2018,” said Mr Hansen.

Esther George, the head of the Kansas Federal Reserve, told an oil forum on Friday that the average price needed by shale drillers to make a profit has fallen from US$79 to $53 in two years as technology matures, and many are making money at prices well below that.

She had a warning for those who expect a return to business as usual in global oil markets, predicting that a “large amount” of production would come on stream as soon as prices push through the mid-US$50s.

“I do not see much room for price appreciation,” she said.

Markets have grown cynical about OPEC rhetoric on cuts. Yet it is increasingly clear that Saudi Arabia has genuinely reversed course under the new energy minister, Khaled al-Falih, and this has changed the character of the Vienna meeting entirely.

The Kingdom can no longer afford to fight a gruelling war of attrition to force rivals out of the market.

While it has succeeded in killing off US$200 billion of investment in deep-water projects, Canadian tar sands and other high-cost ventures, this has come at a very high price.

The Saudis have been burning through foreign exchange reserves at a rate of US$10 billion a month, and contrary to general belief, their usable reserve buffer is relatively thin. They face an internal banking and liquidity squeeze and a construction crash, and have had to tap the global bond markets on a large scale to pay their bills.

“The Saudis are the ones that have suffered the biggest hit in revenue and face the most financial pain, and it has gone on a lot longer than they ever anticipated,” said Mr Fyfe.

Austerity policies are biting in earnest, threatening the social contract of cradle-to-grave welfare that underpins the Wahhabi regime. Cuts in salaries, and perks and allowances have reduced take-home pay for lower-level state employees by as much as 60 per cent.

Intelligence analysts say the Saudi-led war in Yemen is proving far more expensive than admitted, suggesting that budget deficit is significantly higher than the official figure of 13 per cent of GDP. It recently emerged from Pentagon papers that the Saudis have lost 20 of their state-of-the-art Abrams tanks.

Helima Croft from RBC says the Saudis are now throwing their full diplomatic weight behind the search for a deal, though markets have not yet grasped the significance of this. If the Saudis want a deal, a deal is what will almost certainly happen.

Crucially, they need a much firmer oil price to have any chance of floating a 5 per cent share of state oil company Saudi Aramco for a very ambitious US$100 billion.

The country is to release secret details about the true extent of its reserves, frozen at a constant 260 billion barrels since the inception of the modern oil age – a patently absurd estimate.

“We think the Saudis want to see prices at $60,” said Amrita Sen from Energy Aspects. “There is so much hardship in the Kingdom and they know what the repercussions are if there is no deal: prices are going to fall very sharply.”

Ultimately they want to keep the price in a “sweet spot” between US$60 and $80, preventing it rising so high that it leads to a fresh surge of investment in renewables – the real enemy.

The paradox of oil today is that although the market is over-supplied, spare capacity has fallen to wafer-thin levels as OPEC states produce flat out, and the Saudis have just 1.5m b/d left as a safety buffer. All it will take is a geostrategic shock or disruption somewhere in the world for the market to tighten viciously, leading to a fresh global crunch.

Sen said China’s output has fallen by 450,000 b/d, Mexico is down 200,000 b/d, and deeper-water investment has collapsed everywhere. “The risk is that prices are going to react in about 18 months. I wouldn’t rule out a spike to US$100,” she said.

RBC suggests a flutter for the truly brave: buy deep “out-of-the-money” call options on crude oil with strike prices of US$100 and $120. You may hit the jackpot.

Obama’s Terrorists In Syria Get Shipment of “Manpad” Surface-To-Air-Missiles

Ansar al-Islam Front says it has ‘good number’ of man-portable missiles in south Syria, in first apparent relaxation – or breach – of US ban

A member of Ansar al-Islam Front hold an SA-7 anti-aircraft missile (screegrab)

 

A Syrian rebel group has paraded a cache of shoulder-launched anti-aircraft missiles, the first evidence of the weapons being supplied to opposition forces after an expected relaxing of US restrictions.

Members of the Ansar al-Islam Front were shown in a video posted on 20 November testing SA-7 Strela-2 missiles.

READ: ‘Aleppo must not fall’: US allies to flood city with anti-aircraft missiles

The group said they had a “good number” of the weapons, which were being deployed among Ansar and Free Syrian Army forces to counter government aircraft in Daraa and Quneitra, to the south of the country.

The first fighter in the video can be heard saying: “We, in Ansar al-Islam Front, have distributed several points of air defence to counter any attempt by the Syrian warplanes or helicopters which bombs points in Quneitra province. We have good number of these missiles.”

A second fighter, named as “Abu Bilal” in the video, says: “We, in Ansar al-Islam Front and factions of the FSA, are distributing equipment and soldiers toward Tal al-Hara, Mashara, Sandaniya and Jabata. And in the coming days you will hear good news from Quneitra and its surroundings.

“There are a lot of preparations for ambushes and units deployed on the front lines. There are units of air defence, infantry elements and other several sets of our factions and the factions of the FSA in Quneitra and its surroundings.”

US may allow weapons?

The supply of the missiles breaches a standing order from the US to prohibit their distribution in Syria. The US has feared the weapons could fall into the hands of groups such as the Islamic State or the Nusra Front and be used against American forces, their allies and civilian aviation.

However, a high-level rebel source told Middle East Eye in late September that the US was to clear the way for allied nations to begin supplying the weapons, as Russian and Syrian forces increased their attacks on rebel-held areas of the northern city of Aleppo.

“The US confirmed the green light to begin sending them to rebels through supply routes still open through Jordan and Turkey,” the source told MEE at the time. “Rebels are being told only to target Syrian helicopters, not Russian – but it’s not clear they will abide by this.”

The source told Middle East Eye that the US had confirmed it would allow Qatar and Saudi Arabia to begin shipments.

The Reuters news agency at the same time quoted anonymous US officials as saying the assault on Aleppo had “heightened” the possibility of the Obama administration lifting the ban.

However, there is no evidence of the missiles reaching Aleppo, where supply routes have been cut by a siege by Syrian government forces.

The Ansar al-Islam Front is reportedly among dozens of rebel groups that have in the past been supplied with US-made BGM-71 anti-tank missiles, with US approval and through Saudi channels.

The SA-7 was designed by the Soviets in the 1960s and was among the first generation of man-portable air defence weapons, known by the acronym “Manpads”, although there have been several upgraded variants since.

President Trump Meets w/National Media Heads, Blasting Them As A “Roomful of Liars”

Trump Explodes And Turns Off The Record Meeting With TV Networks Into A Total Disaster

politicus-usa

The members of the networks expected to negotiate presidential press access during their meeting with the President-elect. What they got was a Trump-style temper tantrum where his disrespect for the free press was on full display.

Trump Explodes And Turns Off The Record Meeting With TV Networks Into A Total Disaster

President Donald’s Mean Face…reserved for meetings with the lying media.

The members of the networks expected to negotiate presidential press access during their meeting with the President-elect. What they got was a Trump-style temper tantrum where his disrespect for the free press was on full display.

The New York Post reported:

“The meeting was a total disaster. The TV execs and anchors went in there thinking they would be discussing the access they would get to the Trump administration, but instead they got a Trump-style dressing down,” the source added.

A second source confirmed the encounter.

“The meeting took place in a big board room and there were about 30 or 40 people, including the big news anchors from all the networks…,” the source said.

“Trump kept saying, ‘We’re in a room of liars, the deceitful dishonest media who got it all wrong. He addressed everyone in the room calling the media dishonest, deceitful liars. He called out Jeff Zucker by name and said everyone at CNN was a liar, and CNN was network of liars.

The press should have expected this behavior. Donald Trump is not going to suddenly grow up and act like an adult because he won a presidential election. The guy who whines about media coverage with a near pathological zeal won’t see the value of the free press once he becomes president.

Donald Trump doesn’t believe in checks and balances. He doesn’t subscribe to the belief that the free press exists to hold the powerful accountable. In Trump’s view, the press is there to give him good publicity. Any member of the media that does not give Trump good publicity is an enemy.