Saudis Trigger a Huge Slide in Oil Prices Internationally
March 9, 2020 (EIRNS)—As of Monday morning EDT the price of West Texas crude oil had fallen by 33% in 48 hours, dropping from approximately $46/barrel on Friday afternoon (March 6) to $33.25/barrel. What had happened was a sudden move by Saudi ARAMCO, to drastically cut the prices at which it is offering to sell oil, especially in the United States and in Asia. With international demand falling, Saudi Arabia had tried to corral a meeting of oil producers (OPEC-plus as it was called) to cut global oil production by 2 million barrels/day immediately, but Russia refused to agree to this. Saudi Arabia then began an attempt to take chunks of the global oil market by force, targeting Russia, and once again targeting U.S. shale oil production operations.
This sudden lurch by Saudi Arabia coincided, whether causally or not, with a spreading purge by Crown Prince Mohammed bin Salman of Saudi royal family members, who were being arrested and charged with treason. Whether Saudi oil marketing strategy was a part of the obvious disagreements which broke out among the royals there, EIR does not know.
On Sunday, March 8, Goldman Sachs put out a statement cutting its forecast for the price of Brent Crude in the second and third quarters of this year, to $30/barrel with possible dips near $20. This would mean West Texas crude prices at $25/barrel or lower. Whereas Saudi Arabia’s attempt throughout 2014-15 to wipe out U.S. shale production in this way ultimately failed, the large leveraged debt of the U.S. shale sector is already so distressed that this time, it is ready to blow out in a mass of bankruptcies.