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Only last December, the OPEC (and partners) coalition agreed to chop oil output by 1.7 million bpd, and in turn, Saudi Arabia agreed to cut its output by 400,000 bpd. However, Moscow is now backing away from more cuts in production because reducing production would give breathing room to the already suffering US producers.
The US remains unmoved. It refuses to lower output despite the falling oil prices that have seen Washington suffer a minus US$4 in oil futures. Meanwhile, the Kremlin’s response has been to flood the market with even more oil output to push prices down.
While US oil producers have previously proved to be rather resilient to low prices, managing to counterbalance prices as low as US$30 per barrel in the past (see details below), they may not fare so well this time around.
The shale producers were already suffering over the last year as Moscow waged an outright oil price war on them, persistently flooding the market to keep prices down. Needing prices to stay at US$65 per barrel to at least break even, let alone sniff a profit, many US producers filed for bankruptcy.
