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Can Saudi Arabia and Russia win the oil price war?
The lack of agreement between Saudi Arabia and Russia to reduce oil production is probably due to Russia’s determination to stop shale oil production in the United States by making it unprofitable due to the sharp fall in the oil price. Could this attempt succeed? Admittedly, US independent oil companies are fragile and indebted, with little cash reserves, and their investments will fall sharply. But conversely, the low oil price will create a major budgetary problem for Saudi Arabia and to a lesser degree for Russia: as in early 2017 , this could eventually drive them to lower their production, and this will save US shale oil. It is true that from an economic viewpoint, it is illogical to reduce production of cheap oil (Saudi Arabia) because of the increase in production of expensive oil (shale oil in the United States), which may explain Saudi Arabia’s and Russia’s position.
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Natixis
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Patrick Artus
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