The Saudis did not cause the oil price decline. They have not varied production hardly at all for years.
There has been no significant change to supply. Shale has increased at the same rate it has for over 18 months. And demand did not crater starting in June.
Supply and Demand probably do NOT explain this price crash. The dollar’s spike against other currencies does. Look at Copper, and Gold and Silver and others. They all have been smashed too.
The price of production for shale wells is not $40. That’s just absurd. NoDak prices a new well at $10 million and that’s with a 5 year 5% loan. The well requires $2.5 million per year just for loan service. Then you have 18% royalty to the land owner. 5% NoDak extraction tax. Trucks haul the oil and the production disposal water coming up. Those drivers don’t drive free. Then you have to haul fresh water back to the well to clean out salt encrustation. That ain’t free either.
AND the damn wells die fast. They are down to 150 barrel/day within 2 years, but that loan service charge and trucking fees don’t stop.
Forget $40. That’s absurd. All businesses can claim low breakevens just by excluding costs (like salaries haha).
Speculators can make money with the price moving up or down, in the short-term. It is but speculation will not last as months of oil continue to go through supply and demand.