Saudi Arabia’s energy minister Khalid al-Falih, as well as his predecessor Ali al-Naimi, has long maintained — in the face of criticism and even ridicule in some corners — that the kingdom does not consider US shale producers as direct competitors in a finite oil market. In terms of the physical market, the ministers are correct. US shale oil is typically light and sweet, while Saudi Arabia and most of OPEC’s key Middle East members largely produce grades that are sourer and heavier, and many refineries worldwide are not technically nimble enough to drastically alter their crude slates. But even as supplies of the heavier sour grades have tightened substantially following OPEC’s production cut agreement, the recent output surge in the US, in addition to Libya, Nigeria and even Kazakhstan, has left the world awash in light sweet oil, which now serves as the swing barrel in the global […]