Is Saudi Arabia Setting The World Up For Major Oil Price Spike?
In order to maintain a grip on market share by pushing U.S. shale producers out of the market, Saudi Arabia (and OPEC) is willing to use up its spare capacity. That could lead to a price spike.
Saudi Arabia produced 10.3 million barrels per day in the month of March, a 658,000 barrel-per-day increase over the previous month. That is the highest level of production in three decades for the leading OPEC member. On top of the Saudi increase, Iraq boosted output by 556,000 barrels per day, and Libya succeeded in bringing 183,000 barrels per day back online. OPEC is now collectively producing nearly 31.5 million barrels per day, well above the cartel’s stated quota of just 30 million barrels per day.
Related: Latest EIA Predictions Should Be Taken With More Than A Pinch Of Salt
The enormous increase in production comes into a market that is still dealing with extraordinarily low prices. The move could be interpreted as a stepped up effort on behalf of Saudi Arabia to maintain market share at all costs. More output will prolong the slump in oil prices, which will force even more U.S. shale production out of the market. The signs of success are already showing – the U.S. is set to lose 57,000 barrels per day in production in May, and rig counts are still falling.
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