BofA Sees Saudis Embarking on Long But Shallow Oil Price War

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BofA Sees Saudis Embarking on Long But Shallow Oil Price War

OPEC+’s oil-output hikes are part of a Saudi strategy that will see the kingdom embark on a long but shallow price war designed to recapture market share, Bank of America Corp.’s head of commodities research said. The producer group, of which Saudi Arabia is the de-facto leader, announced a third output increase of more than 400,000 barrels […]

The producer group, of which Saudi Arabia is the de-facto leader, announced a third output increase of more than 400,000 barrels a day last month, bigger than previously planned. The additions are reversing years of supply curbs that were aimed at keeping prices higher.

“It’s not a price war that is going to be short and steep; rather it’s going to be a price war that is long and shallow,” BofA’s Francisco Blanch said in a Bloomberg Television interview. That reflects a desire to take market share from US shale, which is in relatively good health but faces higher costs of production, he said.

The kingdom is also working to regain market share from fellow OPEC+ members, according to Blanch.

“They’ve done this price support already by themselves for three-plus years,” which has allowed competitors’ output to rise, he said. “They’re done with that.”

Blanch noted that the change in strategy is already producing results, with the latest US oil-drilling data from Baker Hughes Co. showing the lowest rig count in about four years.

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” Now, with AI, GPUs need data to do a lot of compute and send that back to another GPU. That connection needs to be close together, and that is what’s pushing the density, the chips are more powerful and so on, but the necessity of everything being close together is what’s driving this big revolution,” he said. That revolution in new architecture is new data center designs. Cordovil said that instead of putting the power shelves within the rack, system administrators are putting a sidecar next to those racks and loading the sidecar with the power system, which serves two to four racks. This allows for more compute per rack and lower latency since the data doesn’t have to travel as far. The problem is that 1 mW racks are uncharted territory and no one knows how to manage the power, which is considerable now. ”There’s no user manual that says, hey, just follow this and everything’s going to be all right. You really need to push the boundaries of understanding how to work. You need to start designing something somehow, so that is a challenge to data center designers,” he said. And this brings up another issue: many corporate data centers have power plugs that are like the ones that you have at home, more or less, so they didn’t need to have an advanced electrician certification. “We’re not playing with that power anymore. You need to be very aware of how to connect something. Some of the technicians are going to need to be certified electricians, which is a skills gap in the market that we see in most markets out there,” said Cordovil. A CompTIA A+ certification will teach you the basics of power, but not the advanced skills needed for these increasingly dense racks. Cordovil

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Microsoft will invest $80B in AI data centers in fiscal 2025

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John Deere unveils more autonomous farm machines to address skill labor shortage

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