Summary
- Saudi Arabia offered discounted oil pricing to Asian customers to increase market share.
- The goal appears to harm marginal producers around the globe including producers in the US.
- Sandridge Energy appears one of the vulnerable producers in the US with minimal profits from past capital spending plans.
The recent decision by Saudi Arabia to offer discounted
oil prices to Asian customers has grave indications for the modern
domestic oil producers. Only a few months ago, domestic oil producers
appeared destined for non-stop drilling growth with WTI crude prices
hanging above $100. With the recent substantial declines in oil prices
and growing supplies, one has to wonder if the OPEC led by Saudi Arabia
isn't hoping to crush upstart shale produces in the U.S. that were
previously drilling full speed ahead without any real regard to
long-term prices. The risk OPEC faced is that higher oil prices would
encourage further ramped up drilling in the U.S. and other regions.
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