Recent rumors suggest Saudi Arabia is preparing to accelerate the reversal of its oil production cuts, which has unsettled global oil markets. The Financial Times reported that Saudi Arabia may abandon its unofficial target of $100 per barrel for crude oil and increase output, signaling acceptance of lower prices to protect its market share from non-OPEC producers like the U.S. This comes after a delayed start to unwinding cuts, previously planned for October, and a decline in Brent prices below $70 per barrel due to weak demand and a slowing Chinese economy.
Saudi Arabia, the key player in OPEC+, has been responsible for 2 million barrels per day (mb/d) of production cuts, a significant contribution given OPEC's total cuts of 3.15 mb/d. While OPEC denied setting a new price target, the rumors highlight Saudi Arabia's outsized influence on global oil markets. Analysts at Standard Chartered suggest that the kingdom’s potential output increase may serve as a warning to OPEC+ members that are not complying with their production pledges, rather than a shift towards gaining market share.
Compliance with production cuts is crucial for market stability. Russia, Iraq, and Kazakhstan have committed to compensatory output reductions after overproducing earlier in 2024. These cuts, along with delayed production increases, could result in lower OPEC output through 2025 if commitments are upheld.
Despite facing a budget deficit due to current oil prices, Saudi Arabia has alternative funding options and could afford lower prices in the short term. However, it remains determined to enforce compliance within OPEC+ to maintain discipline and prevent another market collapse like during the COVID-19 pandemic.
(Based on an OilPrice.com news article "Rumors of New Saudi Oil Price Target Are Warning to OPEC Cut Violators" [ Ссылка ])
