Saudi Compliance To OPEC Deal Comes At A Price

4 Oct 2017   OPEC, Saudi Arabia

Saudi Arabia is following through with its pledge to stick to the output cuts in the OPEC/non-OPEC deal. The Kingdom is also reducing exports to some buyers, even to its most prized market—Asia. But this compliance comes at a price—Saudi Arabia has lost market share in Asia, with Russia, Angola and Iraq being the main beneficiaries. At first glance, it may seem odd that Saudi Arabia is giving up some share of its beloved Asian market. But the Kingdom has two very sound reasons to stick to cuts, and to ‘motivate’ other members to do the same. Those two reasons are (a.) reducing the budget deficit and (b.) getting the highest valuation possible for Saudi Aramco before the IPO takes place in 2018. Saudi Arabia’s two main drivers actually come down to just one goal: achieve higher oil prices . However, the Saudis face another dilemma—the higher the price […]

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