Oil wars

Saudi Arabia has said that it will not support further cuts in oil production and is prepared for a prolonged period of low prices. At first glance, this seems illogical, as lower prices mean lower profits. But, as in 2014 , this is a strategic move, where the refusal to cut production led to a collapse in prices and bankruptcies among US shale producers, allowing the Saudis to retain market share.

Today, the situation is repeating itself. Shale production in the U.S. is in the recovery stage, and the Saudis are once again seeking to displace more expensive competitors. After all, the break-even level for shale producers is $59-70 per barrel, while the Saudis' is much lower. When prices fall, the US industry is the first to come under pressure.

Interesting strategy by the Saudis. It's a tough game, but their lower break-even point gives them the upper hand. Wonder how US shale will respond this time around.