Saudi Arabia is batting down the hatches for a "long and shallow” oil price war, in part to clip the wings of US shale energy companies, the Bank of America’s top commodities expert said.
Saudi Arabia led an alliance of energy producers dubbed Opec+ in April to boost supply. The decision was a U-turn for Saudi Arabia, which for years had pushed Opec+ to cut production in a bid to lift energy prices.
However, energy analysts had been warning for more than a year that Saudi Arabia was in an untenable position. The kingdom was doing the heavy lifting to keep supplies low, while other countries were benefiting from higher prices.
Saudi Arabia has also surrendered market share in Asia to Iran and Russia. “They’ve (Saudi Arabia) done this price support already by themselves for three-plus years,” Blanch said. “They’re done with that.”
They were limiting their own production to raise demand and keep the price high, but then realized their competitors were benefiting from selling at those higher prices… so now they’re going to raise their own production and try undercut competitors on prices. They have the capacity to out-produce their competition, so they can afford to sell for slightly less than competitors if they want to, hence the "long and shallow” price war quote.
They are against low prices, but if anyone is buying low they want to be the one selling it.
ok that makes more sense, thank you
Ironically that might move the US towards renewable energy again and away from a fossil fuel based energy independence.
There’s a “US Gov protecting fossils” joke in there somewhere but I don’t really want to kick that hornets nest.