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Saudi Arabia is reportedly abandoning its unofficial $100 per barrel oil price target to reclaim market share, even if it means enduring lower prices in the short term. This strategic pivot, reported by the Financial Times on September 26, 2024, marks a departure from the Kingdom's recent policy of production cuts aimed at propping up oil prices.
The world's top crude exporter and de facto leader of OPEC has been steadily losing market share to non-OPEC producers, particularly the United States. Saudi Arabia's crude output has fallen below 10% of world supply, while U.S. production has surged to 20%, according to International Energy Agency data.
OPEC+, the alliance between OPEC and non-OPEC producers like Russia, has been implementing production cuts since late 2022. Saudi Arabia alone has shouldered a reduction of about 2 million barrels per day (bpd). However, these efforts have done little to boost prices, with Brent crude trading around $72 per barrel as of September 26, down nearly 5% year-to-date.
The Kingdom is now reportedly committed to increasing production as planned on December 1, despite concerns about weak demand growth, particularly in China. This decision suggests a willingness to weather a period of lower oil prices to regain market influence.
Saudi Arabia's shift in strategy echoes previous market share battles, such as the 2014 decision to block OPEC production cuts and the 2020 price war with Russia. The Kingdom believes it has sufficient financial reserves and debt options to withstand lower revenues in the near term.
This policy change comes amid broader economic pressures. OPEC recently trimmed its global oil demand growth outlook, citing weakness in China. Speculators have adopted their most bearish positioning in petroleum futures since records began in 2011.
While Saudi officials have not publicly confirmed this strategy shift, the news has already impacted markets. Brent crude prices fell over 3% in early European trading following the Financial Times report.
