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Low global crude prices have hit Saudi Arabia hard, commented Douglas-Westwood in its Aug. 24 edition of DW Monday. With a considerable budget deficit, Saudi Arabia has been forced to begin borrowing from capital markets – $4 billion in July.
The kingdom is highly reliant on oil – accounting for more than 90% of budget revenues. Cuts have not been made to capital expenditure, and DW notes that Saudi Arabia has engaged in an expensive conflict within Yemen. Consequently, the decision to ride out lower prices has put a huge strain on finances – the International Monetary Fund estimates that $50 oil will lead to a deficit of approximately $140 billion (20% of GDP) this year. Plugging holes in the budget with bond issues is the clearest sign yet that the kingdom is feeling the pinch, and the question is, how long can it continue? 

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To celebrate Kate Winslet’s 40th birthday, there is a titanic shift underway as markets rally strongly to start the week. Although Chinese markets are closed until Thursday, the rest of Asia has been rallying like a mad thing as we are back in the realm of ‘bad is good’. Rising expectations of further stimulus from Japan has supported markets, while waning expectations of a US rate hike (hark, now under 10% for October) further endorse today’s risk-on stance. These factors are also providing headwinds for the US dollar, hence a combination of a weaker dollar and ongoing loose monetary policy is egging on the crude market today.

In terms of economic data flow, PMI services data was below consensus for the Eurozone, held back by Germany and Spain but supported by a better-than-expected print from France. The UK also saw a below-consensus print. Tales of retail sales for the Eurozone, however, came in better than expected at +2.3% YoY, with a positive YoY trend in place (20 straight months): 

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 U.S. Rig Count is down 29 rigs from last week to 809, with oil rigs down 26 to 614, gas rigs down 2 to 195, and miscellaneous rigs down 1 to 0.

U.S. Rig Count is down 1,113 rigs from last year at 1,922, with oil rigs down 977, gas rigs down 135, and miscellaneous rigs down 1.

The U.S. Offshore rig count is 30, down 3 rigs from last week, and down 31 rigs year over year.

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 U.S. Rig Count is down 4 rigs from last week to 838, with oil rigs down 4 to 640, gas rigs down 1 to 197, and miscellaneous rigs up 1 to 1.

U.S. Rig Count is down 1,093 rigs from last year at 1,931, with oil rigs down 952, gas rigs down 141, and miscellaneous rigs unchanged at 1.

The U.S. Offshore rig count is 33, up 2 rigs from last week, and down 29 rigs year over year.

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 DOJ Timing Agreement Extended Three Weeks to December 15, 2015

HOUSTON--(BUSINESS WIRE)--Sep. 28, 2015-- Halliburton Company (NYSE: HAL) and Baker Hughes Incorporated (NYSE: BHI) today announced that the companies will market for sale additional businesses in connection with Halliburton’s pending acquisition of Baker Hughes. Pursuant to the Merger Agreement, and in order to permit completion of Halliburton’s acquisition of Baker Hughes, the following additional businesses are intended to be divested: Halliburton’s expandable liner hangers business, which is part of the company’s Completion & Production Division; Baker Hughes’ core completions business, which includes: packers, flow control tools, subsurface safety systems, intelligent well systems, permanent monitoring, sand control tools and sand control screens; the Baker Hughes sand control business in the Gulf of Mexico, including two pressure pumping vessels; and Baker Hughes’ offshore cementing businesses in Australia, Brazil, the Gulf of Mexico, Norway, and the United Kingdom.

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Oil prices rebound $2/bbl on the New York market Sept. 21 on signs that the growth of US oil production might be slowing, but commodity prices resumed their zigzag pattern again in early trading on Sept. 22, giving up some of the previous day’s gains.

Paul Horsnell, Standard Chartered head of oil research, said, “We think $50/bbl oil is too low an oil price for medium or long-term equilibrium.” He said that price is not sustainable for oil producers.

“Further, $50/bbl leads to sharp increases in demand even in a period of weak economic growth,” Horsnell said. 

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The Organization of Petroleum Exporting Countries and its top oil producer, Saudi Arabia, have given indications recently that the cartel may decide to decrease its oil output in the wake of continuing low prices for crude. On the other hand, Russia, another of the world’s largest oil producers, has stated categorically that it will not cut production.

In a recent interview on Russian TV, Alexander Novak, the country’s energy minister, said he thinks that shale production, particularly from North America, is responsible for the current oil surplus and that any cuts in production should come from those producers. He added that those reductions would serve to stabilize and the oil markets. 

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Weatherford International announced plans Monday to raise $1 billion, fueling speculation that the oil field services company is gearing up for a big buy amid a flurry of deal-making among its competitors.

“Bottom line: It seems clear that the company has a target acquisition to be made and we suspect that it is likely a piece of the Halliburton-Baker Hughes divestitures,” Raymond James analysts wrote in a note.

The Switzerland-based company, which is operated out of Houston, said it plans to raise the money through a combination of debt and stock offerings. Weatherford said it will use the proceeds to fund potential acquisitions and for “general corporate purposes.” 

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HOUSTON — U.S. natural gas production has been holding steady in 2015, but stalled growth this year won’t erase the huge supply of gas driving down prices, according to the latest analysis by financial services firm Raymond James.

Instead, similar to what’s happening in the oil patch, more efficient drilling and prolific shale wells will keep any 2016 cutbacks minor, while positioning the fuel for another production boom in 2017 and 2018. The resulting tide of natural gas means prices are likely to stay low despite this year and next’s flat production growth.

After adding as much as 5.4 billion cubic feet per day in new production in 2014, the U.S.’s natural gas haul leveled off at about 73-75 billion cubic feet per day in early 2015, according to Raymond James. 

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Exxon Mobil is adjusting the way it structures shale acquisitions as the global energy giant expands in West Texas, the largest U.S. oil-producing region.

Executives with Exxon’s shale-drilling unit, XTO Energy, are meeting with small, closely held producers in the Permian Basin to negotiate possible purchases and joint ventures, according to three people familiar with the talks. The company is expanding its use of a new strategy first deployed in the region last year that offers operators a cut of future proceeds rather than big upfront stock or cash payouts, say the people, who asked not to be named because the meetings were private. 

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