Saudi Arabia is preparing to abandon its unofficial oil price target of $100 a barrel as it prepares to increase output to win back market share, even if it means lower prices, the Financial Times reported on Thursday, citing people familiar with the matter.
The Organization of the Petroleum Exporting Countries, de facto led by Riyadh, along with allies including Russia, together known as OPEC+, have been cutting oil output to support prices.
However, prices are down nearly six percent so far this year, amid increasing supply from other producers, especially the United States, and weak demand growth in China.
Earlier this month, OPEC+ agreed to delay a planned oil output increase for October and November after crude prices hit their lowest in nine months, saying it could further pause or reverse the hikes if needed.
The Financial Times reported that the group is committed to increasing production as planned on 1 December, even if that means a longer period of low oil prices.
Global crude benchmark Brent was down about 2.6 percent to $71.57 at 0745 GMT following the report.
The Saudi government communications office did not immediately return a request for comment.
Saudi Arabia has decided that it is unwilling to continue to cede market share to other oil producers and believes it has enough funding options, including foreign reserves and debt, to withstand a period of lower crude prices, the FT said.
The kingdom, the world's top oil exporter, has shouldered a large share of OPEC+ output cuts, reducing its own output by about 2 million barrels per day (bpd) since late 2022.
OPEC+ members are currently cutting output by a total of 5.86 million bpd, equivalent to about 5.7 percent of global oil demand.
However, the kingdom has increased production in the past to defend its market share.
In 2020, Saudi Arabia and Russia engaged in a price war, both flooding world markets with oil after Moscow refused to support OPEC's decision to make deeper output cuts to deal with the fallout from the COVID-19 pandemic.
Riyadh blocked calls by some OPEC members to make output cuts in 2014 to halt a slide in oil prices, setting the stage for a battle for market share between OPEC and non-OPEC producers amid a boom in US shale production.
OPEC and Saudi Arabia have repeatedly said they do not target a certain oil price and make decisions based on market fundamentals to balance supply and demand.
(Reuters)