Photo: Bloomberg
Photo: Bloomberg

A battle of wits

The IM has said in a new report that Saudi Arabia is likely to squander all its financial firepower in five years if oil prices continue to remain low

The collapse in global oil prices last year was partly the result of a high-stakes strategic game between the Arabs and the US. The former seem to have decided to regain market share by letting oil prices drop to a level at which the more expensive US shale will be priced out of the market.

US crude production has begun to fall after reaching a three-decade high in June. Bloomberg reports that the Organization of the Petroleum Exporting Countries has begun to gain market share.

Members of the cartel have had to bear a lot of pain when playing for such high stakes. The loss of oil revenue has put immense pressure on their budgets. How long can they hold out?

The International Monetary Fund has said in a new report, unrelated to the battle of wits in the oil market, that Saudi Arabia is likely to squander all its financial firepower in five years if oil prices continue to remain low. Others such as Venezuela undoubtedly have far less staying power.

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