The oil price war rolls on with benchmark Brent crude hovering around its lowest in four years, below $85 a barrel on Wednesday.<br /><br />Even as the International Energy Agency slashed its forecasts for world oil consumption and demand, core members of OPEC – Saudia Arabia, Iran and Kuwait – said they would not be cutting production to shore up prices.<br /><br />They seem to be focused on fighting for market share in the face of an unrelenting rise in the production of US shale oil. <br /><br />Crude has suffered a four month long rout, slipping over 26 percent since since mid June when prices were boosted to more than $115 by the fighting in Iraq.<br /><br />Michael Hewson, an analyst with CMC Markets, explained why: “We’re in a bit of a price war at the moment, we’ve got more supply then we’ve got demand, and I think this is in part a ploy by Saudi Arabia to I think squeeze the shale oil revolution and US producers more than anything else, but at some point I think we could well hit a floor and that floor is probably around the $80 a barrel mark.”<br /><br />Saudi Arabia is reportedly willing to allow prices to slide as low as eighty dollars for a year or two to make it uneconomic for US shale oil drillers.<br /><br />However, industry experts believe a substantial slow-down in US output is still some way off.<br /><br />Small producers vulnerable to sudden price moves may have to slow spending, fast reducing the amount of oil gushing to market.<br /><br />But even as drillers consider cutting budgets for 2015, output may continue to grow through next year and possibly into 2016, according to those experts.<br /><br />Existing wells that are drilled but not yet fracked will keep output surging for months, they said. <br /><br />Many drillers have long-term rig contracts and are loathe to pay costly penalties for dropping equipment they could need soon after. <br /><br />Most have hedged next year’s production at much higher prices, and are racing to lock in 2016, protecting their revenues even if the free-fall in oil markets continues.<br /><br />Much depends on how the shale industry responds to an unfamiliar environment of lower prices. <br /><br />“It is like turning an aircraft carrier – you can’t do it on a dime,” said Roland Burns, chief financial officer of Comstock Resources in Frisco, Texas, which has operations concentrated in Texas, Louisiana and Mississippi.<br /><br />with Reuters
