The Saudi standoff: Oil-rich nation takes on world’s high-cost producers -Globe and Mail

The Saudis want low oil prices? The Saudis have “trashed the market” before. It’s all about market share. If the price goes low enough, shale oil become less profitable (US shale in particular). That leads to less investment in high cost oil production and if the plan works, fewer competing producers.

“The upshot? Shale oil output is much more sensitive to falling prices than Saudi oil, and the market is beginning to work its magic. Although the U.S. rig count remains well above the level of a year ago, it saw its biggest drop in two years this week and has declined in six of the past nine weeks. And it’s expected to drop sharply next year.”

It’s not good for Canadian tar-sand oil or deep-sea production either. The US is not happy, Canada is not happy, and you can bet Iran is not happy because while they are not into shale or tar-sands, they need the price as high as possible.

For more background, see:
Is a secret ‘oil war’ raging?