Special to WorldTribune.com

Saudi Arabia is going all out in its war on U.S. shale oil and to preempt the return of Iran’s oil production after sanctions are lifted.

Even as the price of crude sunk below $40 per barrel, the Saudis and OPEC decided on Dec. 4 to increase production by 31.5 million barrels per day.

Analysts say the Saudis may be willing to let the price of crude slide near the $20 per barrel mark in order to drown out competition from United States shale producers.

Saudi Oil Minister Ali al-Naimi “said his goal in refusing to cut production was to drive the U.S. drillers out of business. They had been relying increasingly on expensive hydraulic fracturing, which isn’t profitable unless the average global price of oil is about $60 per barrel.

So far that strategy has worked, as rig counts in the United States have fallen substantially,” Andy Tully wrote at Oilprice.com.

After the OPEC decision, the price of crude oil went into free fall, sinking as low as $36.64 per barrel before a minor rebound.

The move was “OPEC’s middle finger to the oil markets,” one analyst said.

Since fracking gained momentum in the U.S., oil prices have dropped from a high of more than $110 per barrel beginning in June 2014 to the sub-$38 mark of today.

“Traditionally, OPEC members have produced about 40 percent of the world’s crude oil, but 18 months ago prodigious U.S. production began to eat into its market share,” Tully wrote.

“Thanks to new technologies for extracting shale oil, the U.S. essentially became the new ‘swing producer’ on the global production stage. Prior to the U.S. emergence, the Saudis were the key swing producer.”

The Saudi strategy is beginning, however, to make other OPEC nations nervous. While Saudi Arabia is sitting on monetary reserves of some $750 billion, the economies of nations such as Venezuela have taken a huge hit from low oil prices.

“Eventually even Saudi Arabia began to feel financial pressure and was forced to revise the projected budget revenues,” Tully wrote. “Even the stock markets of Gulf States were affected: On Oct. 30, the U.S. financial services company Standard & Poor’s cut its rating of the Saudi sovereign debt.”

Still, the Saudis are seen taking their strategy well into 2016 and oil prices will likely continue hovering around multi-year lows.

  Iran, Saudis’ war on the oil markets targets U.S. frackers, Venezuela, WorldTribune.com