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Saudi Arabia hints at renewed race for oil market share

The world’s largest oil producer may be preparing to open its taps after 17 months of oil production constraint ahead of a make-or-break meeting with Opec and its allies.
Fresh data from the cartel shows that Saudi Arabia, the de facto leader of the Organisation of Petroleum Exporting Countries, nudged its oil production up to over 10 million barrels of a oil a day last month.
The figures have raised questions over whether the Kingdom is preparing to fire the starting gun on a renewed race for market share by disbanding the unprecedented supply cut deal which helped to revive the oil market after hitting twelve year lows in early 2016.
Ehsan Khoman, an analyst at MUFG, said that while Saudi Arabia’s 162,000 barrel a day production growth last month does not represent a large magnitude, it does mark “a major shift in strategy” from carefully bolstering market prices to chasing market share.
Opec and its non-Opec allies, led by Russia, will meet in Vienna late next week to decide whether the pact to cut 1.72 million barrels of oil production a day should remain intact after 17 months of restraint.
At a glance | OPEC
“Saudi Arabia and other Opec members are reportedly favouring the idea of increasing output by 300,000 to 400,000 barrels a day,” said Mr Khoman. “Meanwhile, Russia appears to support a more aggressive strategy of increasing output between 800,000 to 1 million barrels a day to rapidly reduce the current over-compliance to the agreement.”
To date the plan has helped buoy prices from under $30 a barrel at the depths of the market crash to over $75 earlier this year.
But the heady pace of the recovery, in large part due to involuntary cuts from Venezuela and geopolitical jitters over whether oil supplies from Iran which be hit by US sanctions, has raised concerns that the prices might be too high.
Some Opec members are understood to be wary of the higher prices which threaten to cannibalise long-term demand for oil as it becomes more expensive.
Saudi Arabia hints at renewed race for oil market share

Higher oil prices sparked a return of shale rigs across the US – but Opec may be about to reclaim a bigger market share

Credit:
David McNew/Getty Images
The price surge has also sparked a return of shale oil rigs across the US in a threat to the market share of Opec members.
The indecision over whether cuts will continue or not has stalled the upward march of the oil market, which came within a breath of the $80 a barrel mark last month.
David Madden, of CMC Markets, said the talk that Russia and Saudi Arabia will increase output, “has scared away the bulls”.
“The oil market reached a multi-year high last month, but volatility has dropped off since. It appears that traders are playing the wait-and-see game,” he said.
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