The global oil industry is entering a phase of prolonged low prices as Saudi Arabia, the leading force within OPEC+, initiates a major shift in its strategy. The Kingdom is no longer focused on price stability but instead aims to boost production volumes to regain control of the market, reports Baltimore Chronicle with reference to Bloomberg.
Last month, the OPEC+ alliance announced its third production increase in recent times—by more than 400,000 barrels per day, exceeding previously agreed targets. This move marks a clear departure from the long-standing policy of supply cuts aimed at maintaining high prices. The new priority is market share.
According to Francisco Blanch, head of global commodities research at Bank of America Corp., Saudi Arabia is not seeking a quick price collapse. Instead, it is preparing for a drawn-out and systematic campaign to push competitors out of the market, particularly U.S. shale producers. While the U.S. shale sector remains relatively stable, its higher production costs make it vulnerable to prolonged periods of low prices.
Beyond the American market, Riyadh also seeks to reclaim market share lost to its OPEC+ partners. As Blanch points out, Saudi Arabia had supported higher prices for over three years to benefit the alliance, but that phase is now over. This development indicates a possible shift in internal dynamics within OPEC+, as the Kingdom appears increasingly reluctant to bear the brunt of production cuts alone.
Signs of the new strategy’s impact are already emerging. Recent data from Baker Hughes Co. show U.S. drilling activity at its lowest level in four years. This could be an early indicator that American shale producers are beginning to scale back in response to the market shift caused by increased supply.
The new “price war,” as projected by Bank of America, is expected to be protracted and methodical. Rather than aiming for a rapid knockout, Saudi Arabia intends to gradually edge out competitors and reshape the global oil landscape in its favor. The consequences of this approach will be felt worldwide, influencing not just energy prices but also the economic stability of many oil-producing and oil-consuming nations.
Earlier we wrote that global oil prices rise following new OPEC+ statement.