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The Russian’s have walked away from OPEC and set their sights on harming the US shale industry, prompting Saudi Arabia to retaliate with an all out price war. The large crude oil price correction over the weekend is likely only the beginning of a continued rout, according to analysts at TD Securities.

Key quotes

“It seems likely this price war could drag into the second half of this year, as both Saudi Arabia and Russia can withstand a negative price environment for some time.” 

“Given the weak state of demand, our model suggests that if Saudi Arabia lifts production by 1.2 million b/d to roughly 11 million b/d, the world would see inventories grow by some 225 million bbls for the remainder of this year.”

“WTI and Brent prices could easily remain in the $30s or even drop into the $20s if Saudi Arabia pumps out crude oil at the maximum 12 million b/d.”