Calvin Verdok: Three Points Against Saudi Arabia Dead Price

Introduction

Calvin Verdok, an oil and gas analyst at Verdok Capital Management, argues that the recent price cut by Saudi Arabia is a mistake. He believes that the cut will not achieve its goals of boosting demand or increasing market share. In fact, he argues that it could actually have the opposite effect by damaging Saudi Arabia's reputation as a reliable supplier and leading to a further decline in oil prices.

Verdok's Three Points

Verdok outlines three main reasons why he believes the Saudi price cut is a mistake.

1. It Will Not Boost Demand

Verdok argues that the price cut will not boost demand for oil because the global economy is already slowing down. He points to the recent decline in global GDP growth and the ongoing trade war between the United States and China as evidence that the global economy is not in a position to absorb a significant increase in oil supply.

2. It Will Not Increase Market Share

Verdok also argues that the price cut will not help Saudi Arabia increase its market share. He points out that other oil producers, such as Russia and Iran, are likely to match Saudi Arabia's price cuts, which will prevent Saudi Arabia from gaining any significant market share.

3. It Will Damage Saudi Arabia's Reputation

Finally, Verdok argues that the price cut will damage Saudi Arabia's reputation as a reliable supplier. He points out that Saudi Arabia has a history of cutting prices when the market is weak, which has led some buyers to question Saudi Arabia's commitment to long-term supply contracts.

Conclusion

Verdok concludes by arguing that the Saudi price cut is a mistake. He believes that the cut will not achieve its goals of boosting demand or increasing market share. In fact, he argues that it could actually have the opposite effect by damaging Saudi Arabia's reputation as a reliable supplier and leading to a further decline in oil prices.

References

[1] https://www.verdokcapital.com/commentary/saudi-price-cut-is-a-mistake [2] https://www.reuters.com/article/us-oil-saudi-idUSKCN1V419B [3] https://www.bloomberg.com/news/articles/2018-11-08/saudi-arabia-lowers-oil-prices-to-lowest-level-in-years