Saudi Arabia has been signaling for weeks that it is and will be doing whatever it takes to rebalance the oil market by slashing exports and pumping well below its quota under the OPEC+ deal—despite US shale’s persistence.
Yet, while neither the Saudis nor OPEC would officially admit that they are aiming for higher oil prices or a specific price of oil, the combined efforts of the OPEC/non-OPEC group to withhold 1.2 million bpd of supply are targeting a tighter market—and higher oil prices.
Even if higher oil prices are indeed helping U.S. shale producers to pump oil at record levels, OPEC’s largest producer and de facto leader Saudi Arabia reportedly prefers higher oil prices rather than hanging onto its market share.
The Saudis are aiming for at least $70 a barrel Brent Crude because the Kingdom’s budget needs these higher prices, industry sources familiar with Saudi Arabia’s oil policies tell Reuters. And they may need even higher than that.
According to estimates from the International Monetary Fund (IMF), the Saudis need much higher oil prices for a budget breakeven in 2019—at $80-85 a barrel, Jihad Azour, Director of the Middle East and Central Asia Department at the IMF, told Reuters last month.