The U.S. flag is displayed at Tesoro's Los Angeles oil refinery in Los Angeles, California October 10, 2014.REUTERS/Lucy Nicholson
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Saudi Arabia effectively started a global oil price war this month aimed at quickly denting U.S. oil output.Many observers expect a downward spiral of global oil prices to rapidly dampen shale oil drilling in the United States, slow production growth and help bolster prices.Saudi Arabia has privately told the oil market that it is willing to allow prices to slide as low as $80 for a year or two, in a move seen aimed at U.S. producers.A four-month rout in oil markets that has knocked Brent crude to $85 a barrel, its lowest level in four years, poses the first major challenge to the U.S. shale sector since it emerged four years ago and sent oil output to its highest in a generation.U.S. output is the highest in 30 years, thanks to output from newly tapped and prolific shale formations.Due to the rapid 70 percent decline rate in shale oil wells after the first year, flat spending would cut shale production growth to just 200,000 barrels per day. U.S. oil output has surged by 1 million bpd in each of the past three years.
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