Saudi Arabia Prepares to Abandon $100 Oil Price Target to Regain Market Share

Saudi Arabia is shifting its strategy by preparing to move away from its informal goal of maintaining oil prices at $100 per barrel, according to a report by the *Financial Times* on Thursday. The kingdom is planning to raise its oil output in a bid to reclaim its lost market share, even if that leads to a drop in prices.

For years, the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, has implemented oil production cuts, collaborating with allies like Russia under the OPEC+ alliance. These cuts were aimed at supporting oil prices. However, despite these efforts, global oil prices have dropped by almost 5% since the start of the year. This decline has been attributed to rising oil production from other countries, particularly the United States, along with slower demand growth from China.

OPEC+ has been making adjustments to its output strategy in response to the fluctuating oil market. Earlier in the month, the group decided to postpone a planned increase in oil production for October and November. This decision came after crude oil prices fell to a nine-month low. The group also indicated that further delays or reversals of production hikes might be considered depending on market conditions.

The Financial Times, citing sources familiar with Saudi Arabia’s plans, reported that the kingdom remains committed to increasing oil production as planned on December 1. The decision to raise output could lead to an extended period of lower oil prices. However, Saudi Arabia is reportedly willing to accept this outcome in its pursuit of greater market share.

Following the release of the Financial Times report, Brent crude, a global oil benchmark, saw a 1.7% drop, reaching $72.25 by 10:31 GMT.

As of now, Saudi Arabia’s government has not commented on the report. However, the shifting dynamics within OPEC+ have been evident in the group’s declining influence over the global oil market. Formed in 2016, OPEC+ has seen its market share decrease due to production cuts implemented since 2022, coupled with rising output from other producers, particularly the United States. According to the International Energy Agency (IEA), OPEC+ now accounts for less than half of the world’s total oil supply, a significant drop from previous years.

OPEC+ is responsible for approximately 48% of the world’s oil output. Within this group, Saudi Arabia contributes less than 10% of global oil supply, while U.S. production has increased to 20% of the global market. This shift highlights the growing dominance of U.S. oil producers, especially as they ramp up production to meet global demand.

According to the Financial Times, Saudi Arabia has concluded that it will no longer sacrifice its market share in order to maintain higher prices. The kingdom believes it is well-positioned to handle the economic impact of lower oil prices, with enough financial reserves and access to debt markets to withstand any temporary setbacks. This strategy reflects Saudi Arabia’s determination to reassert its dominance in the global oil market, even if it means enduring short-term financial pain.

Saudi Arabia, which holds the title of the world’s largest oil exporter, has shouldered a considerable portion of the production cuts that OPEC+ has imposed since 2022. The kingdom has reduced its own output by approximately 2 million barrels per day (bpd) since late 2022, playing a pivotal role in efforts to stabilize global oil prices.

Currently, OPEC+ members are collectively cutting 5.86 million bpd from their production levels, a reduction that accounts for about 5.7% of global oil demand. These cuts have been crucial in balancing the oil market, but Saudi Arabia’s willingness to boost output now signals a shift in priorities.

This isn’t the first time Saudi Arabia has chosen to increase production in defense of its market share. In 2020, the kingdom engaged in a price war with Russia, another major oil producer, after Moscow refused to back OPEC’s plan for deeper production cuts to address the economic fallout of the COVID-19 pandemic. During that time, both countries flooded the market with oil, driving prices lower in an attempt to outlast the other.

Saudi Arabia also made a similar move in 2014 when it resisted calls from other OPEC members to reduce production in order to prevent oil prices from falling further. This decision set the stage for a prolonged battle for market share between OPEC and non-OPEC producers, as U.S. shale oil production surged, adding more supply to an already saturated market.

Despite these aggressive market tactics, Saudi Arabia and OPEC have repeatedly maintained that they do not aim for a specific oil price target. Instead, the group’s decisions are driven by market fundamentals, with the primary objective of balancing global supply and demand.

Although Saudi Arabia is now willing to accept lower prices in exchange for greater market share, this move could have significant consequences for the global oil market. Increased production from the kingdom could push prices down further, putting pressure on other OPEC+ members and non-OPEC producers alike. Countries that rely heavily on oil revenue may find it challenging to cope with prolonged periods of low prices, leading to economic instability in some regions.

At the same time, consumers and industries around the world could benefit from lower oil prices, particularly as the global economy continues to recover from the effects of the COVID-19 pandemic. Reduced energy costs could provide much-needed relief for businesses and households, especially in countries that are still grappling with inflation and supply chain disruptions.

However, Saudi Arabia’s decision to prioritize market share over price stability may not sit well with all of its OPEC+ partners. Some members of the alliance may be more dependent on higher oil prices to support their domestic economies and could push back against the kingdom’s plan to increase output. The internal dynamics within OPEC+ could become more complicated as countries weigh their own economic interests against the collective goals of the group.

As the global oil market continues to evolve, Saudi Arabia’s willingness to adapt its strategy underscores the kingdom’s commitment to remaining a key player in the industry. By focusing on market share, Riyadh hopes to secure its long-term position as a leading oil producer, even if that means enduring short-term financial challenges