What happened

Shares of oil giant ConocoPhillips (COP -0.93%) are down almost 5% today, continuing a slide that has seen its stock price fall more than 10% over the past week. Today's move lower is the product of a huge drop in crude oil prices following news that Saudi Arabia was cutting prices to two of the world's biggest crude markets: Asia and the United States. 

So what

Screen shot of oil prices falling.

Image source: Getty Images.

At this writing, Brent crude futures for November delivery are down more than 5% to $39.84%, while key U.S. benchmark West Texas Intermediate October deliveries are down a brutal 7.4% to $36.84 per barrel. 

That puts U.S. crude prices at the lowest levels since early June, erasing the gains that had U.S. crude prices above $40 per barrel for the majority of the peak summer-driving season. Today's sharp move lower means oil prices have fallen every market day in September, as the industry comes out of the peak summer-demand season in weak shape. Demand for gasoline over the summer stayed close to 1 million barrels per day below year-ago levels. 

Heading into the fall, Saudi Arabia's move is a reversal in course in the U.S., where it had seen shipments fall to multi-year lows in the second quarter, while shipments to Asia -- China in particular -- helped it ride out the worst collapse in oil demand in history. 

Yet Chinese refiners have cut back on aggressive bargain shopping for crude, and Saudi Arabia is using its pricing power to bludgeon other oil producers out of the way to claim more share in the shrinking market. 

Now what

Saudi Arabia's dominance in global-pricing power has negative implications across the oil patch, but producers like ConocoPhillips are especially exposed to these aggressive pricing moves, which directly impacts its ability to produce oil at profitable prices. 

The good news for ConocoPhillips is that it's one of the most cost-competitive of the large independent producers. It has large reserves that can be profitable at or even a little bit below $30 per barrel, and that gives it breathing room that many smaller independent producers just don't have. 

But with that said, investors should continue to step lightly. Weak demand will push global heavyweights like Saudi Arabia and Russia to fight for market share, with marginal production like U.S. shale getting squeezed out when it can't compete. Even though ConocoPhillips can survive with current oil prices due to its cheaper production and $7.9 billion in cash, weak global oil demand will weigh on its results heavily. 

So long as the coronavirus pandemic continues to impact global travel and economic output, oil prices will be driven by state-controlled behemoths fighting for market share. ConocoPhillips is likely to come through this downturn OK but with a lot less cash and a lot more debt. That could weigh on investor returns for some time to come.