Saudi Arabia’s shift from defence of oil price to aiming to expand market share could mean lower crude price for longer, say an analysts.
The major policy shift will pile more pressures on oil dependant nations like Nigeria already feeling the heat of falling oil prices.
Saudi officials are said to be briefing allies and industry experts to say the kingdom is unwilling to prop up the oil market with further supply cuts and can handle a prolonged period of low prices, five sources with knowledge of the talks said.
This possible shift in Saudi policy could suggest a move toward producing more and expanding its market share, a major change after five years spent balancing the market through deep output as a leader of the OPEC+ group of oil producers.
Those cuts supported prices, in turn bolstering the oil export revenue that many oil producers rely on.
The Saudi government’s communications office did not reply to a Reuters request for comment on the matter.
Riyadh has been angered by Kazakhstan and Iraq producing above their OPEC+ targets, the sources said. The group establishes those targets to keep supply and demand balanced in oil markets.
After pushing members to adhere to those targets and to compensate for oversupply in recent months, a frustrated Riyadh is changing tack, OPEC+ sources said.
Saudi Arabia pushed for a larger-than-planned OPEC+ output hike in May, a decision that helped send oil prices below $60 a barrel to a 4-year low.
Lower prices are bad news for producers that rely on oil exports to fund their economies.
Although producers like Saudi have a very low cost of production, they need higher oil prices to pay for government spending. When oil prices fall, many large oil-producing countries come under pressure to cut their budgets.
