(Reuters) – Saudi Arabia is preparing to abandon its unofficial target of a barrel of oil at $100, with the kingdom poised to increase production in order to regain market share, even if prices are falling further, the Financial Times reported on Thursday, citing sources close to the matter.

Anxious to raise crude prices, the Organization of the Petroleum Exporting Countries (OPEC), dominated by Riyadh and its allies such as Russia, grouped under the name OPEC+, has been reducing its production for years.

The oil market, however, is down almost 6% since the start of the year, due to the increase in supply from other producers, notably from the United States, and the weak growth in demand for China.

The barrel of Brent is trading on Thursday morning down 2.34% to $71.74.

In early September, OPEC+ discussed the possibility of postponing planned production increases in October and November as oil prices fell to their lowest level in nine months, sources told Reuters. The organization added, according to these sources, that it could interrupt or cancel the planned increases if necessary.

According to the Financial Times, OPEC+ has now decided to increase its production from December 1, even if this must be done at the price of a lower barrel over a longer period.

Contacted, the Saudi government communications service did not immediately respond to a request for comment.

Riyadh does not want to continue to cede market share to other oil producers and believes it has enough financing options to cope with a period of falling crude prices, explains the FT.

The kingdom, the world’s leading oil exporter, concentrates a large part of OPEC+’s production reduction policy. Its production has been cut by around two million barrels per day (bpd) since the end of 2022.

OPEC+ members are currently cutting production by a total of 5.86 million bpd, equivalent to around 5.7% of global oil demand.

Saudi Arabia, however, has increased production in the past to defend its market share.

In 2020, Saudi Arabia and Russia engaged in a price war, both flooding global markets with oil after Moscow refused to support OPEC’s decision to further cut production to cope with the impact of the COVID-19 pandemic.

In 2014, Riyadh opposed calls from some OPEC members to cut production to stem falling oil prices, paving the way for a market share battle between OPEC and non-OPEC producers. members of the organization, in a context of increasing American production via shale oil.

OPEC and Saudi Arabia have repeatedly assured that they are not targeting a specific price level for a barrel of oil and that their decisions are taken based on market fundamentals and with the aim of balancing supply and request.

(Reporting by Yousef Saba in Dubai; with contribution from Shivani Tanna in Bangalore; Claude Chendjou; edited by Sophie Louet)

Copyright © 2024 Thomson Reuters