Good morning; here's what the Oilman has for you today:

• Saudi Arabia Gets Serious about Production Cuts

• ConocoPhillips Makes Long-Term LNG Bet

• Upcoming Oil and Gas Events

• Tweet of the Day

Saudi Arabia Gets Serious about Production Cuts

Saudi Arabia is extending its oil production cuts for a third month and has hinted it might deepen them.

The extension was not a surprise, but deeper and longer cuts might become a problem.

“Whatever it takes”

The phrase was once often used by former Saudi energy minister Khalid Al-Falih.

It was supposed to demonstrate how committed the Saudis were to a well-supplied but also well-priced oil market.

Now, supply doesn’t seem to be of concern to the biggest OPE producer.

It’s prices that are taking a toll on the Saudi economy.

Also, on its billion-dollar plans for diversification.

So it’s back to “Whatever it takes” mode, even if it means losing market share.

And even if it means even worse relations with the U.S.

Would the Saudis even care about U.S. relations after Biden’s fist-bump and the threats he made last year “Pump more or else”?

It’s not the best time to cut production… for buyers

The extended cuts and the threat to deepen them come at a bad time, supply-wise.

The EIA just reported it expects U.S. shale output to fall this month.

That would be the first time this year production declines in the shale patch.

Meanwhile, oil demand forecasts remain upbeat.

Clearly, the Saudis will get the higher prices they want.

Even though the surprise Fitch downgrade of the U.S. credit rating depressed them.

It was temporary – benchmarks just logged a six-week streak of gains.

So, the Saudis will be getting their budget revenues.

The rest of us will be getting higher prices at the pump.

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ConocoPhillips Makes Long-Term LNG Bet

ConocoPhillips has inked 20-year deals for LNG purchases from Mexico Pacific.

The deals cover some 2.2 million tons of LNG annually.

The future is gassy and liquefied

The Conoco deal with Mexico Pacific comes a couple of weeks after Chevron announced a focus on LNG purchases rather than production.

The major said it was going to stick to its long-term supply deals and not bother with building LNG trains.

It seems Conoco plans to do the same thing, and that is the smart thing to do.

Demand for LNG is going strong despite lower prices.

It’s trough demand season in Europe and Asia, but things are beginning to change.

Importers are starting to prepare for the winter.

And this cycle in LNG demand is not going to change in a few years.

Why else would both Conoco and Chevron commit to long-term deals?

Why else are there so many LNG projects under development along the Gulf Coast?

Because the demand is there, and it’s not going anywhere.

LNG terminals are risky business

Building an LNG production facility costs billions.

It also often ends up costing a lot more than initially expected.

And you have to have buyer commitments to go forward at all.

It’s risky business – riskier than just buying the stuff.

And that’s exactly why Chevron and Conoco are doing what they’re doing.

Chevron is also eyeing a role as natgas supplier to the liquefaction.

It’s a win-win… unless the next administration bans all-natural gas, of course

Upcoming Oil & Gas Events

• August 9: Petroleum Alliance of Oklahoma Wildcatters, Petroleum Club of Oklahoma City

• August 13-15: GO-WV Summer meeting, The Greenbrier, White Suplhur Springs WV

• August 13-16: EnerCom Denver, The Westin Denver Downtown Denver

Around the Global Patch

🇸🇦 Saudi Arabia's budget deficit soars 80% on lower oil revenue.
🇨🇳 China embraces green hydrogen production in Northern Region.
🇷🇺 Russia ends oil tanker ban following Black Sea drone attacks.

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