Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman has expressed concern over OPEC countries’ failure to comply with agreements to limit oil production. According to him, if these violations continue, oil prices could fall to a critically low level of $50 per barrel. The prince made it clear that Saudi Arabia is ready to take drastic measures, including the start of a price war, if it becomes necessary to protect its market share. This is stated in the material of The Wall Street Journal, according to Komersant ukrainskyi
Such statements provoked a reaction among other OPEC members, who took them as a direct warning: either all participants adhere to the agreed production quotas, or the Saudi kingdom will act more decisively. This tension is particularly concerning for Iraq and Kazakhstan, two countries that have repeatedly violated quotas. Iraq, for example, produced 400,000 barrels per day more than the quota in August, while Kazakhstan plans to increase production by restarting the Tengiz oil field, where volumes could reach 720,000 barrels per day.
Meanwhile, other events are taking place on the global market that affect prices. Iran’s missile attack on Israel caused a spike in oil prices, breaking their several-week decline. In particular, the price of Brent crude initially rose by 5% and later stabilised with a 2.4% increase, approaching $70 per barrel.
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Although the global community is concerned that an escalation of the conflict in the region could disrupt oil exports through the Strait of Hormuz, the key transport hub bordering Iran has not yet seen any serious long-term impact on prices. This is causing disappointment among Saudi officials, who had hoped for a different development. The problem is that other OPEC members are not fulfilling their obligations to limit production, which increases tensions within the cartel.
“There is no point in increasing production if there is no market for this oil,”
– said one of the Saudi delegates at the OPEC conference.
However, this is exactly what Saudi Arabia is going to do – increase production – if it is not heard in OPEC. This is how it intends to regain its market share, while simultaneously reducing oil prices.