Saudi Arabia Poised to Shift Oil Strategy Amid Pricing Pressures

Saudi Arabia is set to abandon its $100-a-barrel price target for crude oil, indicating an increase in output. This decision, driven by the need to reclaim market share, comes despite OPEC+ efforts to support prices through coordinated output cuts. Reduced crude prices may prolong as production ramps up on Dec. 1.

Saudi Arabia is preparing to abandon its unofficial price target of $100 a barrel for crude as it gears up to increase output, the Financial Times reported Thursday, citing people familiar with the matter.

The Organization of the Petroleum Exporting Countries (OPEC), de facto led by Riyadh, along with allies like Russia—known collectively as OPEC+—have been cutting oil output to support prices. Earlier this month, OPEC+ decided to delay a planned oil output increase for October and November after crude prices hit their lowest in nine months, stating it could further pause or reverse the hikes if needed.

The Financial Times reported that the group is committed to increasing production as planned on Dec. 1, even if that means enduring a longer period of low oil prices. Global crude benchmark Brent fell around 2% to $71.97 following the report.

The Saudi government communications office did not immediately respond to a request for comment. Saudi Arabia has decided it will no longer cede market share to other oil producers, confident that it has sufficient funding options through foreign reserves and debt to manage a period of lower crude prices, according to the FT.

The kingdom, the world's largest oil exporter, has taken on a significant share of OPEC+ output cuts, reducing its output by about 2 million barrels per day (bpd) since late 2022. OPEC+ members are currently cutting output by a total of 5.86 million bpd, approximately 5.7% of global oil demand.

Historically, the kingdom has increased production to defend its market share. In 2020, Saudi Arabia and Russia engaged in a price war, both saturating global markets with oil after Moscow refused to support deeper OPEC output cuts to address the COVID-19 pandemic's fallout.

In 2014, Riyadh opposed calls from some OPEC members to cut output to arrest falling oil prices, setting the stage for a market share battle between OPEC and non-OPEC producers amid a surge in U.S. shale production.

(With inputs from agencies.)