Saudis Fire Again in Oil War Against U.S. Shale

By Oil FOXBusiness

Saudi Arabia launched a third-wave attack this week in its oil price war with the U.S. shale oil producer. First they cut prices, then they refused to cut production, and now they cut prices again.

Continue Reading Below

Oil prices fell Thursday when Saudi Aramco, the state owned oil company, showed no sign of retreat and cut its price on its Arab light to a record low $2.00 discount to the  local benchmark  for customers in  Asia and prices for all grades of crude to U.S. refineries. Not even an insipid market reaction after comments from ECB President Mario Draghi that railed the Euro was enough to give oil support in the aftermath of the Saudi price cutting offensive.

At this point what has to be clear is that the Saudis will defend their market share, whatever the cost may be, they will cut prices in Asia, they will cut prices in  Europe, they will cut prices in the U.S., they shall never surrender.

They won’t surrender because they know that their economic existence may come down to winning this price war, and if you want to know why the Saudis will give you 36.5 billion reasons. That is number of barrels that the Energy Information Administration now says we have in proven oil reserves in the United States, a 9.4% increase and the most amount of oil we have had since 1975. The Saudis realize that as our technology in the U.S. will continue to allow us to expand the amount of oil that we can feasibly get out of the ground, and if they don’t try to make that economically more difficult, they will lose their stranglehold on the West as well as the oil global market place.

The fears are becoming more acute as the debate to export oil in the U.S. is heating up and politics are in play. The ban on oil exports from the days of the oil embargo may fall as the U.S. looks for a way to respond to the actions of Saudi Arabia. Lifting the ban would allow U.S. oil producers to sell oil in global markets where they can command a higher price.

Not only that, the U.S. State Department is now appointing a “top diplomat for energy affairs” to try to leverage our new energy producing clout with other countries. The Obama administration named Amos Hochstein to the new post. 

Continue Reading Below

In the meantime, another beneficiary of the Price War might be “Big Oil”. No not including the small shale companies but really “Big Oil.” Exxon Mobil’s CEO said that Exxon (XOM) can afford oil at $40 a barrel. So in other words, like vultures they will be able to swoop up the shale producers that end up going under.  

Who is Futures Magazines “Man of the Year?” Price Links Video series gives insight across the financial spectrum. https://www.youtube.com/playlist?list=PLDq9JQANqxRxCBaHqunzBT4Frxitjw-XV

Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.

The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks.

What do you think?

Click the button below to comment on this article.