Saudi Arabia is considering flooding the oil market with increased supply, which could be enough to lower prices, a prominent expert suggested. OPEC+ concluded its most recent meeting without making firm commitments on production cuts, causing oil prices to fall. Meanwhile, Saudi Arabia is reportedly contemplating reversing its production curbs as it attempts to regain control over prices.
In an interview with CNBC on Friday, Paul Sankey from Sankey Research stated that Saudi Arabia may need to “flush this thing out,” suggesting that the country has the capacity to increase its output by an additional 2.5 million barrels a day.
While OPEC is currently trying to support crude prices by reducing production, Sankey pointed out that in 2014, Saudi Arabia shocked markets by flooding the market and causing a significant drop in crude prices. This forced higher-cost producers to exit the market, while Saudi Arabia was able to weather the lower prices and regain control over prices as supplies from its rivals disappeared.
The expert also highlighted the challenge posed by booming US oil supply, stating that OPEC and Saudi Arabia have “a huge problem with US production levels.” Indeed, US crude production reached a record high of over 13.2 million barrels a day in September, according to data from the Energy Information Administration. This situation underscores the complex dynamics at play in the global oil market.
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