The global hydrocarbon market is in turmoil. According to the Wall Street Journal, Saudi Arabia has issued a warning that oil prices could drop to $50 per barrel.
Saudi Energy Minister Prince Abdulaziz bin Salman has alerted OPEC+ members that such a drastic decline in oil prices is possible if the alliance fails to adhere to agreed production cuts.
As noted by the WSJ, this statement was interpreted by other OPEC+ members as a veiled threat. The prince expressed dissatisfaction, particularly pointing to Iraq and Kazakhstan, which had reportedly been neglecting their commitments to the cartel.
The threat implies that Saudi Arabia is prepared to launch a price war by ramping up oil production. While this could temporarily depress prices, it would allow the kingdom to regain its shrinking market share through increased output.
According to the Financial Times, Riyadh could potentially take such extreme measures, leveraging its low production costs to quickly scale up output. Speculation is rife that the kingdom could abandon production cuts as early as December 1, 2024.
In the meantime, Saudi Arabia supports curbing oil production to sustain global prices, taking on greater responsibilities within OPEC+. However, the country is frustrated by other members' failure to meet their quotas, while production growth outside the cartel, particularly in the United States, hampers efforts to keep prices at desirable levels. As a result, the kingdom faces losses from both reduced production and lower oil prices.
Earlier, as oil futures returned to $70 per barrel, market participants speculated that OPEC+ was losing control of the commodity market. With this in mind, analysts believe that some countries may soon withdraw from the agreement.
