Who will blink first?

The Herald reports:

The Saudis may go public, OPEC’s in disarray, the U.S. is suddenly a global exporter, and shale drillers are seeking lifelines from investors as banks abandon them.

Welcome to oil’s new world order, full of stresses, strains and fractures.

For leaders gathering in Houston next week at the IHS CERAWeek conference — often dubbed the Davos of the energy industry — a key question is: what will break first? Will it be the balance sheets of big U.S. shale companies? The treasuries of Venezuela and Nigeria? The resolve of Saudi Arabia, whose recent deal with Russia to freeze output levels offered the first hint of a rethink?

A number of US companies are losing money and may go bankrupt. But that won’t help the other producers long-term. If the price then starts to rise, their licenses will be picked up by other companies and production will increase again.

Where the risk is borne by private companies not Governments, the impact is less. It is on those companies, not the country.

Saudi has huge reserves so can keep going. Russia and Venezuela are probably the two countries most at risk.

U.S. shale drillers had a key role in bringing prices that low, by adding 4 million barrels a day in less than four years – – almost like a new OPEC member materializing overnight. Natural gas has mirrored the pattern, with surging output and plunging prices.

Frack baby frack.

Russia has a relatively diversified economy, but it’s still running the biggest deficit in five years, and selling assets to finance a stimulus program. Nigeria, which depends on oil for almost all of its exports, is battling to stave off a currency devaluation and pleading for development loans to replace the missing petrodollars. Venezuela is even worse off, with debt defaults looming and an inflation rate estimated by the International Monetary Fund at 275 percent.

Venezuela is the one closest to collapse.