Saudi Arabia abandons target of $100 oil price

Saudi Arabia - the world's largest oil exporter - will increase production to regain market share, abandoning its goal of pushing fuel prices to $100 a barrel.

The Financial Times on September 26 quoted sources as saying that from December, the group of Petroleum Exporting Countries (OPEC) and its allies (including Russia), known as the OPEC+ alliance, will gradually increase oil production. This is to help Saudi Arabia - the leader of OPEC - regain market share, even though fuel prices may fall. This move means that they are about to give up the goal of raising oil prices to $100 a barrel.

Saudi Arabia is the world’s largest oil exporter. Over the past two years, OPEC+ countries have cooperated to reduce oil production to push up prices. However, this year, prices have fallen by nearly 6%. The reason is that countries such as the US have increased production. Meanwhile, fuel demand in China, the world’s leading oil importer, has weakened. This development forced OPEC+ to announce earlier this month that it would postpone plans to increase production in October and November.

Outside an event of Saudi Aramco - the Saudi Arabian state-owned oil company. Photo: Reuters

Following the news, Brent crude fell 2.1% to $72 a barrel. US WTI crude also fell to $68.

OPEC and Saudi Arabia have always maintained that they do not have specific targets for oil prices. Decisions are based on market developments and the desire to balance supply and demand.

However, according to the International Monetary Fund (IMF), Saudi Arabia needs a price of around $100 to balance its budget. Crown Prince Mohammed bin Salman is seeking funding for mega-projects to reform the country's economy.

The decision represents a major shift in Saudi Arabia’s stance, which is now shouldering the bulk of OPEC+’s production cuts. The country has voluntarily cut 2 million barrels a day since late 2022. OPEC+’s total cuts now total 5.86 million barrels a day, or 5.7% of global demand.

This is not the first time the Middle Eastern country has increased production to protect its market share. In 2020, it entered into an oil price war with Russia. Relations between the two sides deteriorated after Moscow rejected proposals to cut production and extend the OPEC deal to cut production. In response, Saudi Arabia announced a price cut and increased production. The war lasted about a month, before OPEC and Russia reached a new agreement.

In 2014, Riyadh also rejected calls from other OPEC countries to reduce production to curb falling oil prices. This sparked a market share war between OPEC and non-OPEC countries, in the context of increased US shale oil production.