According to Bloomberg :

Saudi Arabia is one of the few countries in the world that can boast crude production that’s profitable in the current environment. But the kingdom’s economy is at risk, too, as Riyadh needs much higher prices to fund its budget. So does Russia.

Why is boasting oil production in the pandemic-driven drop in demand of oil profitable for SA? I just don't get it.

The same article next states:

Russia argued at the time that it wasn’t willing to keep sacrificing production at its companies to prop up prices while shale explorers in the U.S. benefited from the cuts without contributing to them.

Follow up (I have to admit)

Why do shale explorers benefit from the current situation?


1 Answer 1


The country's funding costs are very low in comparison:

at an average of 25 per barrel (in comparison: Russia is funding for 45, the fracking, which is mainly carried out in the United States, costs $ 75 per barrel). So the earnings are above average anyway.

The USA, which has become a serious competitor, should give up market share. Today the United States produces almost as much oil as Saudi Arabia. The Middle East is fighting back with a crowding-out competition.

With state reserves of $ 750 billion, the desert state can easily cope with lower oil revenues over the years.

  • $\begingroup$ @SA Besides lower production costs, and state reserves, might it also be the case that SA has a large on-land storage capacity for oil? So basically Russia wants the US to also enforce production limits on their oil domestic producers similar to what is discussed between the OPEC+ parties. Which means that US were telling other parties to cut production but not for themselves up until now? $\endgroup$
    – Yunus King
    Commented Apr 10, 2020 at 8:02

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