Oil Price War: West vs OPEC – Imminent?
- As OPEC+ considers maintaining high oil production, the central question for markets is whether Saudi Arabia will repeat its past strategy of initiating an oil price war.
- Saudi Arabia increased production,aiming to bankrupt U.S.companies.
- oil rig count plummeted, and numerous projects faced postponement.
saudi Arabia could be on the verge of another oil price war,but will it target U.S. shale again? The kingdom previously tried to bankrupt American shale producers in both 2014-2016 and 2020,with mixed results. These battles,fueled by overproduction,lead to Saudi Arabia depleting its reserves,and,in 2020,intervention by the trump administration. Despite technological advancements, the breakeven cost for new U.S. shale wells remains around $65, making this sector a high-stakes target. news Directory 3 has the key insights. Considering the current landscape, will Riyadh gamble on a strategy that has proven costly and largely ineffective in the past? Discover what’s next.
Will Saudi Arabia Risk Another Oil Price War to Target U.S. shale?
Updated June 03, 2025
As OPEC+ considers maintaining high oil production, the central question for markets is whether Saudi Arabia will repeat its past strategy of initiating an oil price war. Previous attempts to undermine the U.S. shale sector in 2014-2016 and 2020 proved largely unsuccessful.
The 2014-2016 war stemmed from the belief that U.S. shale producers needed $70 per barrel to break even. Saudi Arabia increased production,aiming to bankrupt U.S.companies. Government figures even held meetings in New York to outline their strategy, anticipating Brent prices between $80 and $90, or even lower, to discipline other OPEC members.
Initially, the U.S. oil rig count plummeted, and numerous projects faced postponement. Shale producers cut investment by roughly 50%, down to $60 billion. Though, the U.S.shale sector adapted, becoming more efficient and profitable at West Texas Intermediate prices above $35. This was achieved through technological advancements in drilling and fracking.
During this period,Saudi Arabia’s budget shifted to a record $98 billion deficit in 2015,depleting $250 billion in foreign exchange reserves. OPEC members collectively lost an estimated $450 billion in revenue.
The 2020 oil price war failed due to intervention by then-President Donald Trump. Concerned about rising gasoline prices, Trump warned Saudi Arabia against threatening the U.S. shale industry. He reportedly told King Salman bin Abdulaziz al Saud that U.S. military support was contingent on ending the price war. After further warnings to crown Prince mohammed bin Salman, OPEC production cuts followed.
Currently, the U.S. shale sector’s breakeven cost is around $65 for new wells, according to the Dallas Fed Energy Survey. While Saudi Arabia’s lifting costs remain low at $3-5 per barrel, its fiscal breakeven price is approximately $90.9, according to the IMF.
A senior energy source familiar with the U.S.Presidential Administration suggests that Washington anticipates a more measured approach from Saudi Arabia regarding oil production increases, coordinated with the U.S. “oil prices at the lower end of recent historical averages suit the U.S. from an inflationary perspective, provided that they don’t go too low, and Washington has made this clear to the Saudis,” he said.
What’s next
The U.S. believes Saudi Arabia will likely favor a more moderate approach to oil production, balancing its budgetary needs with broader financial and security considerations, potentially borrowing to bridge any revenue gaps.