Amidst concerns about plummeting oil prices, Saudi Arabia is contemplating a strategic move to flood the market with additional oil supplies, potentially reversing its recent production curbs. Energy market veteran Paul Sankey, from Sankey Research, suggested that this aggressive approach is necessary for Saudi Arabia to regain control over oil prices, a tactic previously employed by the kingdom in 2014. Sankey estimated that Saudi Arabia has the capacity to increase its daily output by an additional 2.5 million barrels, a move that could significantly impact the global oil market.
While Saudi Arabia currently attempts to bolster crude prices by reducing its output, the recent OPEC+ meeting concluded with members pledging voluntary production cuts without committing firmly, leading to a fall in oil prices. The Kingdom’s decision to extend its 1 million barrel per day cut into the first quarter reflects its ongoing efforts to stabilize the market. However, facing challenges from booming U.S. oil production levels, Saudi Arabia may resort to a strategy reminiscent of 2014, attempting to flush the market to regain control as higher-cost producers exit amid falling prices. This echoes the ongoing struggle between OPEC, led by Saudi Arabia, and the booming U.S. oil industry. The surge in U.S. crude output, reaching a record high of over 13.2 million barrels per day in September, poses a significant challenge for OPEC, emphasizing the complex dynamics influencing global oil prices.