It appears, just as we warned two weeks ago [7], that the 'dumping strategy' designed to punish Obama's nemesis Putin could have morphed into a Saudi Arabian strategy to keep its foot on the neck of the US Shale Oil industry. In an awkward headline for mainstream media to explain, The Kingdom has raised prices of its Arab Light crude exports to Asia and Europe but cut prices to the USA significantly, potentially pressuring domestic suppliers with foreign 'cheap' imports. While not a primary course of US oil, we suspect the signaling of this move is more worrisome for Shale capex (especially as we noted Saudi Arabia can survive 7.9 years at lower prices [8]) Forget currency wars, meet oil wars...
One of these regions is an up-and-coming marginal oil-producer with the swing-barrel of production
[9]
So while we understand if Saudi Arabia is employing a dumping strategy to punish the Kremlin as per the "deal" with Obama's White House, [10] very soon there will be a very vocal, very insolvent and very domestic shale community demanding answers from the Obama administration, as once again the "costs" meant to punish Russia end up crippling the only truly viable industry under the current presidency. As a reminder, the last time Obama threatened Russia with "costs", he sent Europe into a triple-dip recession. It would truly be the crowning achievement of Obama's career if, amazingly, he manages to bankrupt the US shale "miracle" next.
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