Targeted by Saudi Arabia and Russia .. Will "American shale oil" fall victim to the price war?

A report in the American Oil Price site stated that shale oil in the United States will be a party to the oil price war launched by Saudi Arabia and Russia, following the collapse of an agreement to increase production cuts between OPEC and major non-OPEC producers to support crude markets.

"Counting shale oil in the United States is the third party to this oil disaster," the report said to author Julian Jaeger, adding that Russia and Saudi Arabia are likely to seek to limit US oil production, which has undermined OPEC Plus's efforts to manage the market so far.

The report stated that "new horrors" appeared in the oil market, as Russia and Saudi Arabia launched a comprehensive war on crude prices, while both were preparing to increase production and dump the market.

The report asked about "the huge oil product that will be declared defeated first, Saudi Arabia or Russia?"

The writer indicated in her report that in the midst of this "tragic development" which witnessed a bad end of the relationship between Saudi Arabia and Russia, analysts and banks are seeking to restore their expectations for oil prices again, with the continuation of the Corona virus and the increase in oil production at a time expected to shrink Oil demand in 2020 for the first time since 2009.

Withstand the price war
The writer clarified that Russia can bear oil prices ranging between 25 and 30 dollars a barrel for a period of six to ten years, at a time when some analysts said this is "unrealistic", and that the most realistic time frame for resilience can be measured in months, not years.

And the author considered that the important thing is not that Russia can afford $ 25 for ten years, but rather that Moscow continues for a longer period compared to Saudi Arabia, which is now competing with it.

"Russia's keenness to test this theory may seem somewhat arrogant to some," she said.

It is noteworthy that oil prices fell more than 1% on Wednesday, Brent crude fell less than $ 37, while US crude fell less than $ 34.

Will shale oil drop?
The author said that if Russia and Saudi Arabia had already agreed to further cut production, then what about American shale oil?

She added that Russia has long claimed that further production cuts by OPEC members were offset by an American expansion of "shale oil" production, noting that the United States produced more oil than Saudi Arabia or Russia.

"We, by giving up our own markets, are working to remove cheap Arab and Russian oil from these countries in order to make room for costly American shale oil production and ensure the efficiency of its production," the writer said.

The author stated that there is no real solution to this dilemma faced by OPEC and its allies, as efforts to manipulate the market managed to maintain oil prices for a period of time, but it also opened the door to the exploitation of shale oil in the United States, where American production companies were ready to benefit from it. .

But for the time being - says the author - Russia has expressed its willingness to contribute to a decline in the share of US shale oil through the low oil price mechanism, through which Moscow hopes to disrupt America's energy independence plan.

Oil equivalent points
The author confirms that Saudi Arabia, even if she spoke of an oil price parity point that remains low at ten dollars, but that these figures were not subject to review and cannot be verified.

She said that the breakeven point for the Saudi budget is close to $ 83.6 a barrel, which is twice the level that Russia needs, and much less than the level in which oil is traded today.

She added that Saudi Arabia is unlikely to be able to outpace Russia in this conflict, but it may depend on US shale oil that can withstand at least.

Shale oil benefits from Saudi Arabia and Russia
The writer said that shale oil producers in the United States are completely different from Saudi Arabia and Russia, because all shale oil companies in America are not state-owned, and because they are able to operate independently.

She added that the American shale oil has so far held up more than most analysts believed and was taller than Saudi Arabia believed, noting that Saudi Arabia failed miserably when it tried to harm shale oil.

And the writer considered that analysts and OPEC members made a mistake in the past and exposed themselves to danger when they expected that American oil companies will face difficult times, at a time when the American oil producers' tie point became about $ 40.

"The shale oil in the United States has accepted the quantities of oil that OPEC and Russia ceded, and it may do so again, which makes Russia and Saudi Arabia fight over who will be the biggest loser," she said.