Back in 2014, Saudi Arabia was leading a market-share war against shale oil producers, the oil Kingdom refused to cut its oil output and led OPEC members -back in November 2014- in their decision to let the oil market balance itself, allowing oil prices to crush. Things changed, and now Saudi Arabia oil policy has different priorities.
Driven by internal political changes, low oil revenues, and the Kingdom’s plan for Aramco’s IPO, Saudi Arabia is now supporting the oil price rally in an effort to see oil prices sustainable above $60/bbl. What is the problem what that?
There is no problem with seeing oil prices increase, however, in its mission to artificially balance the oil supply and demand in order to prepare the oil market for Aramco IPO, the oil Kingdom risks losing its market-share and could eventually drive the oil market back right to where it was prior to 2014 oil price collapse.
Looking at the current state of the oil market, it just feels like what was happening prior to mid-2014 oil price collapse is taking place right now. Conventional oil producers who are in need for higher oil revenues are driving oil prices up by cutting their oil output, while on the other hand, unconventional oil producers continue to break new oil production records. And before you know it, oil prices crush.
Only when U.S. becomes the world largest oil producer -which may not take long given the current oil output growth in U.S., Saudi Arabia’s oil policy makers will realize they have made the same mistake again.
