Date
17 August 2017
Saudi Arabia's shift in its oil pricing policy is aimed at slowing the expansion of rival producers. Photo: Reuters
Saudi Arabia's shift in its oil pricing policy is aimed at slowing the expansion of rival producers. Photo: Reuters

Saudis would accept lower oil prices

Saudi Arabia would be comfortable with much lower oil prices for the long haul, according to Reuters.

The Saudis are quietly shifting its oil policy in a move to slow the expansion of rival producers, particularly the United States.

Some members of the Organization of Petroleum Exporting Countries OPEC members want production cuts to push oil prices back up above US$100 a barrel.

But Saudi officials have given a different message in meetings with investors and analysts.

They would oil prices below US$90 per barrel, perhaps even US$80, for as long as a year or two, the report said, citing people who have been briefed on the recent conversations.

The discussions, some in New York over the past week, offer the clearest sign yet that the kingdom is setting aside its longstanding de facto aim of holding prices at around US$100 a barrel for Brent crude in favor of retaining market share in years to come.

The Saudis appear to be betting lower prices – which could strain the finances of some PEC members – will be necessary to pave the way for higher revenue in the medium term, by curbing new investment and further increases in supply from places like the US shale patch or ultra-deepwater, according to the sources, who declined to be identified due to the private nature of the discussions.

One source not directly involved in the discussions said the kingdom does not necessarily want prices to slide further, but is unwilling to shoulder production cuts unilaterally and is prepared to tolerate lower prices until others in OPEC commit to action.

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RC/RA

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