The Saudi oil minister has said prices could drop to as low as $50 per barrel if so-called cheaters within OPEC+ don’t stick to agreed-upon production limits, according to delegates in the cartel.
The Saudi oil minister’s statement suggests a clear warning to OPEC+ members who are not adhering to the agreed-upon production limits. By mentioning the potential drop of oil prices to as low as $50 per barrel, the minister is likely signaling that Saudi Arabia is prepared to initiate a price war if necessary to protect its market share. This would involve significantly increasing oil production, flooding the market, and driving down prices—a tactic Saudi Arabia has used in the past.
Such a move could have wide-reaching consequences, impacting the global oil market by driving down prices sharply. It could also hurt other OPEC+ members, particularly those with higher production costs or economies that rely heavily on stable oil prices. The warning comes amid ongoing efforts by OPEC+ to control production levels in order to maintain a balance between supply and demand, keeping oil prices from falling too low.
Saudi Arabia has a history of using its dominant position in OPEC to influence global oil prices, and this threat could be a tactic to ensure compliance within the group. A price war could undermine short-term revenues for all producers, but Saudi Arabia’s low production costs allow it to weather such storms better than most other oil-producing nations.