Saudi Arabia is batting down the hatches for a “long and shallow” oil price war, in part to clip the wings of US shale energy companies, the Bank of America’s top commodities expert said.
“It’s not a price war that is going to be short and steep; rather, it’s going to be a price war that is long and shallow,” Francisco Blanch, the bank’s head of commodities research, told Bloomberg in an interview on Monday.
Saudi Arabia led an alliance of energy producers dubbed Opec+ in April to boost supply. The decision was a U-turn for Saudi Arabia, which for years had pushed Opec+ to cut production in a bid to lift energy prices.
Saudi Energy Minister Abdulaziz bin Salman went so far as to warn market speculators that they would be “ouching like hell” if they doubted his willingness to starve the oil market of supply.
However, energy analysts had been warning for more than a year that Saudi Arabia was in an untenable position. The kingdom was doing the heavy lifting to keep supplies low, while other countries were benefiting from higher prices.
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Saudi Arabia has also surrendered market share in Asia to Iran and Russia.
“They’ve (Saudi Arabia) done this price support already by themselves for three-plus years,” Blanch said. “They’re done with that.”
The United Arab Emirates won concessions to lift its production quotas in recent years. Abu Dhabi wants to pump more of its oil faster, with an eye towards a time in the future when energy demand peaks.
In April, energy analysts also said Saudi Arabia’s decision to boost output was taking aim at Iraq and Kazakhstan, two Opec+ members who were exceeding their Opec+ production quotas. Because Saudi Arabia is richer and is able to quickly extract oil, analysts say it can endure a prolonged slump better than poorer Opec+ members.
The Bank of America’s analysis points to another target: the United States.
The US has become energy independent thanks to a boom in shale oil production over the last 15 years. The US is not a member of Opec, and American production has surged.
Oil and gas production in the US hit a record high in December 2025.
Saudi Arabia has been issuing a historic amount of debt to make up for budget shortfalls caused by lower oil prices.
The kingdom is already scaling back mega-projects like Neom and tightening its purse strings on consulting firms that have raked up a windfall advising on Crown Prince Mohammed bin Salman’s Vision 2030 agenda to remake Saudi Arabia’s economy.
The worst-case scenario for Saudi Arabia is that oil prices spiral further down, risking a price war like the one that erupted in 2020 between Russia and the kingdom during the coronavirus pandemic.