How will the international oil market price war unfold? Bank of America: Saudi Arabia is waging a relatively mild protracted war

Francisco Blanch, head of global commodities research at Bank of America, said on Monday that OPEC+'s plan to increase oil production is part of a Saudi strategy that will lead to a long but mild price war aimed at regaining market share.

On May 31, OPEC+ member countries agreed to increase oil supply by 411,000 barrels per day (bpd) in July, marking the third consecutive significant production increase by the alliance. These increases are reversing years of supply constraints aimed at maintaining higher oil prices.

In response, Blanch said in an interview with the media that this is not a short and sharp price war; instead, it will be a long and mild one.

He pointed out that this reflects Saudi Arabia's intention to seize market share from US shale oil producers, who are currently in relatively good shape but face higher production costs.

Blanch also said that Saudi Arabia is also striving to regain market share from other OPEC+ member countries.

"They (the Saudis) have been alone in this price support measure for more than three years, which has allowed competitors to increase their production. Now they are no longer doing so," Blanch said.

Blanch noted that this strategic shift has begun to yield results. According to the latest US oil drilling data from Baker Hughes, the number of active oil and natural gas rigs in the US has fallen to its lowest point in about four years.

Similarly, analysts including Martijn Rats from Morgan Stanley pointed out in a report on June 2 that OPEC+ is likely to continue increasing production over the next three months, a move that will push oil prices down. This means that by October this year, the 2.2 million bpd of voluntary production cuts decided by OPEC+ in 2023 will have fully rebounded, completely eliminating the cuts made at that time.