Saudi Arabia’s rivals in the shale fields from North Dakota to Texas aren’t flinching as the Persian Gulf kingdom wages a price war to reclaim market share and chill competition.
The U.S. companies believe they have a lot more staying power than many of Saudi Arabia’s partners in the Organization of Petroleum Exporting Countries, or OPEC. Several producers plan on increasing production.
“Saudi Arabia is really taking a big gamble here,” Archie Dunham, chairman of shale producer Chesapeake Energy Corp., said during a telephone interview. “If they take the price down to $60 or $70 a barrel, you will see a slowdown in the U.S. But you’re not going to see it stop. The consequences for other OPEC countries are far more dire.”
The decline of global benchmark Brent crude to a four-year low today added to market jitters as Saudi Arabia prepares to meet with its 11 fellow cartel members on the U.S. Thanksgiving holiday Nov. 27. After cutting its price for crude sold to the Americans, the worry is Saudi Arabia will choose not to pare production to help balance supplies and boost prices.
That may work for Saudi Arabia, which has enough cash and other assets stashed away to withstand oil around $50 a barrel, said Dunham, also former chairman and chief executive officer of ConocoPhillips. But “the vast majority of the OPEC producers cannot make their budgets and keep their people happy with prices below $80 a barrel.”
Rest of the article in Bloomberg
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