Saudi Arabia wants to keep oil flowing, prices low and knock out Shale Gas producers

Saudi Arabia wants to keep oil flowing, prices low and knock out Shale Gas producersPosted on November 25, 2014 in EnergyThe oil price, which briefly bumped above $80 a barrel on hopes of a tightening at Thursday’s OPEC meeting, lost momentum overnight after the Saudi Oil Minister offered his perspective. Saudi Arabia is taking a long view: they’re comfortable with temporarily lower oil prices, betting that at these or even lower oil prices the US Shale Gale will run out of steam. Production from shale is far more expensive than what it costs Saudi Arabia to bring its crude oil to surface. The cure for a low oil price, it seems, is a low oil price. – AHBy Ian Timberlake of Agence France-Presse Photo credit: Foter / Public domainOPEC’s biggest crude producer Saudi Arabia will have its sights set on the upstart US shale oil business at a crucial cartel meeting to debate possible output cuts on Thursday.Analysts say the kingdom is content to see shale oil producers — and even some members of the cartel — suffer from low prices and will resist pressure to reduce output and shore up the cost of oil.A barrel of crude has plunged by about one third in value since June to around $80 in an increasingly competitive market.Saudi Oil Minister Ali al-Naimi was silent about his government’s intentions Monday as he arrived in Vienna ahead of the OPEC gathering.“Is this the first time we have oversupply?” he was quoted as saying by Dow Jones Newswires when questioned about current supply and demand.However his Iraqi counterpart Abdel Mahdi arrived in Vienna pushing for action, deeming the steep price drop “not acceptable”.Analysts say the kingdom is strong enough to withstand lower prices.“Saudi Arabia wants to try and knock out shale oil competitors from the market,” said Saudi economist Abdulwahab Abu-Dahesh.“They have the fiscal strength to remain steadfast for two to three years,” he told AFP.Oil prices have collapsed to four-year lows on factors including dampening demand in a sluggish world economy, a sharp rise in output from shale oil and other unconventional sources, and a strong dollar.

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