How Saudi Arabia can withstand the shale oil boom

New signs of surging U.S. oil supplies have further bolstered the view that after an eight-month rout for the oil price, the Organization of the Petroleum Exporting Countries (OPEC) has lost its grip on the oil market.

But Saudi Arabia's tactics mark a shift in policy rather than an irreversible loss of market share according to Barclays, who say the top OPEC exporter is shaping up to be the "most flexible oil supplier on the planet".

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Pump jacks and wells on the Monterey Shale formation in California
David McNew / Stringer | Getty Images News
Pump jacks and wells on the Monterey Shale formation in California

"People are writing off Saudi Arabia, saying they have just relinquished their role as spare capacity holder to more expensive non OPEC suppliers like the US," energy markets analyst in the commodities research team at Barclays, Miswin Mahesh told CNBC.

"Saudi Arabia has signaled that it is moving away from its traditional role as swing supplier of crude, relaying the role to more expensive non-OPEC suppliers. As the kingdom focuses on market share, it still has the potential to become one of the most flexible suppliers of petroleum," he said.

Mahesh's comments come as former chair of the U.S. Federal Reserve claimed that America's shale oil revolution mean OPEC's oil pricing power may never be regained. Prices have collapsed by as much as 60 percent since summer 2014.

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U.S. crude inventories rose to 425.6 million barrels last week, up by 7.7 million barrels, data from the Energy Information Administration showed Thursday, marking the sixth straight week of record high gains.

"What we are saying is Saudi Arabia can actually send refined products to markets where they can't really undercut an oil producer directly – possibly because of long-term contracts and by providing refined products, the underlying refinery cannot process the competitors' crude. It gives them a lot of flexibility and also for the oil markets, the composition of the spare capacity changes," Mahesh said.

"Our expectation is $60 a barrel for 2016, but for the next few months we see a lot of weakness coming," he added.