Quote:
Originally Posted by Tribesman
Or is it the Saudis increasing production to push the US shale industry to the point where they can't afford to extract the oil?
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Exactly. Officials in Saudi Arabia have signaled that lower prices (say, $80 per barrel or lower) could make some shale-oil producers in the United States unprofitable and force the US to cut back on production. Saudi Arabia would be fine with that, since its type of oil tends to be cheaper to produce than most shale oil projects in the United States. That US cutback, in turn, could help stabilize prices.
The question is how far Saudi Arabia can let prices fall without incurring too much domestic pain. In September, the International Monetary Fund warned that Saudi Arabia would run a deficit of roughly 1.4 percent in 2015. Not least since the country has been ramping up big infrastructure projects and doling out foreign aid around the Middle East of late. That shortfall would force the country to start drawing down its massive foreign-exchange reserves. But considering how massive those reserves are, there is no real putting them over a barrel there.