Crude collapsed by more than 30 percent under the combined pressure of a no-deal end to the OPEC+ meeting last week and Saudi Arabia's announcement on Sunday that it would turn the taps on and pump as much oil as it can.
At the time of writing, Brent crude was trading at $31.34 a barrel and West Texas Intermediate was changing hands at $27.44 a barrel and the bottom is anyone's guess as the Covid-19 outbreak continues to spread globally, fueling panic and growing fears about oil demand.
This weekend, Saudi Arabia first said it would cut its official selling prices for April by between $6 and $8 per barrel, signaling it was now changing its priorities and focusing on preserving its market share.
At the same time, Bloomberg's Javier Blas and Anthony DiPaola reported that the Kingdom was planning to raise production, going to a record-high of 12 million bpd if it had to, according to unnamed sources in the know. The purpose could be to make Russia and other producers feel the pain that Saudi Arabia is feeling in the price department and convince them to agree to cuts, according to Blas and DiPaola.
However, if this is indeed the Kingdom's purpose, it may be miscalculated as Russia is less reliant on oil revenues and it also has no ambitious multi-billion-dollar investment programs. And, according to analysts, it wants to hurt U.S. shale.
"Russia has been dropping hints that the real target is the US shale oil producers, because it is fed up with cutting output and just leaving them with space," analysts from energy consultancy FGE said in a note cited by CNN. "Such an attack may be doomed to failure unless prices remain low for a long time."
Now that Saudi Arabia has decided to do a U-turn, its impact on shale producers would be pretty quick to manifest: a lot of the industry is already feeling pain from lower prices before the crash, coupled with a growing unease among banks to lend to shale drillers who have billions in pending debt repayments.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More