http://www.wsj.com/articles/why-saudis-decided-not-to-prop-up-oil-1419219182?mod=WSJ_hp_RightTopStories
Why Saudis Decided Not to Prop Up Oil
American Shale Oil, A Perceived Threat to OPEC Market Share
By Jay Solomon in Washington and Summer Said in Dubai
Dec. 21, 2014 10:33 p.m. ET
In early October, Saudi Arabia’s representative to OPEC surprised attendees at a New York seminar by revealing his government was content to let global energy prices slide.
Nasser al-Dossary ’s message broke from Saudi orthodoxy that sought to keep prices high by limiting global oil production. That set the stage for Saudi Arabia to send crude prices tumbling late last month after persuading other members of the Organization of the Petroleum Exporting Countries to keep production steady.
But the story of Saudi Arabia’s new oil strategy, pieced together through interviews with senior Middle Eastern, American and European officials, isn’t one of an old alliance. It is a story of a budding rivalry, driven by a threat posed by American energy firms.
Mr. Dossary’s October message signaled a direct challenge to North American energy firms that the Arab monarchy believes have fueled a supply glut by using new shale-oil technologies.
Saudi officials became convinced they couldn’t bolster prices alone amid the new-crude flood. They also concluded many other OPEC members would balk at meaningful cuts, as would big non-OPEC producers like Russia and Mexico. If Riyadh cut production alone, Saudi officials feared, other producers would swoop in and steal market share.
Saudi oil minister Ali al-Naimi tested that conclusion just 48 hours before the Nov. 27 OPEC decision, meeting in Vienna with oil heads of several big producer nations to suggest a coordinated output cut. As he suspected going in, he couldn’t get an agreement.
The option left: Let prices slide to test how long, and at what levels, American shale producers can keep pumping.
