Saudi Arabia’s Market Share Battle Will Drive Oil Lower in the Short Term

Saudi Arabia embarked on its market-share-recapture strategy very late in the game — a clear missed call on what was to develop in unconventional reservoirs. Today however, they remain steadfast in their desire to disenfranchise unconventional reserves around the globe through dictating a price point for crude that even in the best of reservoirs would barely cover direct operating costs, much less provide returns on investment in new wells.

Saudi Arabia’s Vision 2030 plan and follow-on statements by Saudi officials point to a desire for growth through non-oil revenues. How? First, generate capital (to invest in non-oil revenue sources) from oil itself – through lower prices. As one of the lowest cost producers in OPEC, they are uniquely suited to that strategic approach. Second, monetize pieces of Aramco.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza