Saudi Arabia joined an agreement with Russia, Qatar, and Venezuela to freeze oil output at January levels. The move of Saudi Arabia seriously undermined its authority. According to commodity experts, the tentative deal means Saudi Arabia acknowledged its inability to control the global oil market on its own. Thus, the limitless power of the world’s largest oil producer belongs to history.
Importantly, Saudi Arabia and Russia reached an accord to fix oil production at the level, which hit a new historical high in January. It is no surprise that oil erased gains on the London Commodity Exchange after rising before the meeting. It signals traders see no immediate end to the global supply glut. However, Saudi Arabia’s intention to make joint efforts suggests its power is gradually waning.
Saudi Arabia-led oil cartel OPEC persistently refused to lower its 30 million barrel-a-day production ceiling in a strategy to squeeze out higher cost energy producers, including US shale companies. US competitors managed to adjust to new conditions and survive owing to cuts in spending. With this preliminary deal, Saudi Arabia is obviously pursuing strategic aims. In fact, Saudi oil minister Ali Al-Naimi considers any cooperation with other oil exporters to be humiliating. There is a big question mark over the success of the first ever forced cooperation between OPEC and non-OPEC producers.
