Saudi Arabia is going all out in its war on U.S. shale oil and to preempt the return of Iran’s oil production after sanctions are lifted.
Even as the price of crude sunk below $40 per barrel, the Saudis and OPEC decided on Dec. 4 to increase production by 31.5 million barrels per day.
Analysts say the Saudis may be willing to let the price of crude slide near the $20 per barrel mark in order to drown out competition from United States shale producers.
Saudi Oil Minister Ali al-Naimi “said his goal in refusing to cut production was to drive the U.S. drillers out of business. They had been relying increasingly on expensive hydraulic fracturing, which isn’t profitable unless the average global price of oil is about $60 per barrel.
So far that strategy has worked, as rig counts in the United States have fallen substantially,” Andy Tully wrote at Oilprice.com.
After the OPEC decision, the price of crude oil went into free fall, sinking as low as $36.64 per barrel before a minor rebound.
The move was “OPEC’s middle finger to the oil markets,” one analyst said.
Full article: Saudis’ war on the oil markets targets U.S. frackers, Iran, Venezuela (World Tribune)