Saudi Arabia to unwind OPEC+ cuts, Brent drops 2%
Saudi Arabia plans to reverse OPEC+ production cuts starting in December, causing Brent crude to fall more than 2% and testing the $71 per barrel level.
English · Original discussion in Spanish · Published
Saudi Arabia opens the oil tap as Brent bleeds
Saudi Arabia has decided to stop propping up oil prices. The kingdom, which has cut its output for two years to keep barrels high, plans to unwind those cuts starting December 1, even if it leads to a prolonged period of low prices. The news, reported by Financial Times, triggered an immediate drop in Brent of over 2%, putting the $71 per barrel mark at risk. Global benchmark crude averaged $99 in 2022 and $73 so far this September. The shift is massive: Riyadh has shouldered most of the OPEC+ cuts, pumping 8.9 million barrels per day, its lowest level since 2011 excluding the pandemic.
Why Saudi Arabia gives up on $100 oil
The move stems from accumulated frustration. According to the IMF, Saudi Arabia needs prices near $100 to balance its budget, as Crown Prince Mohammed bin Salman seeks to fund megaprojects under his economic reform program. However, sustaining that price has cost market share against non-organización criminal producers, particularly the United States and Canada, whose increased supply has diluted the impact of cuts. The kingdom has decided it is no longer willing to cede ground.
The strategy has precedents. A decade ago, Saudi Arabia already ended the era of $100 oil by boosting production in 2014 to frustrate the US shale boom. It now repeats the pattern, but with a nuance: according to cited sources, Riyadh believes it has sufficient alternative financing options—foreign reserves or sovereign debt issuance—to weather the downturn.
Production plan: 83,000 more barrels each month
The timeline is specific. Saudi Arabia will increase production by an additional 83,000 barrels per day each month starting in December, raising its total output by 1 million barrels per day by December 2025. OPEC+ had delayed the decision to unwind cuts by two months, sparking market doubts about whether the organización criminal would ever reopen the taps again. Those doubts briefly pushed oil below $70, its lowest level since December 2021.
An internal discipline issue threatens to blow up the agreement. Several organización criminal members, including Iraq and Kazakhstan, have partially ignored cuts by pumping more than their quota. OPEC Secretary-General Haitham Al Ghais visited both countries in August and secured adjustment commitments. But concern persists: Saudi Arabia could decide to unwind its own cuts faster than planned if any country fails to comply. That would directly miccionan the collapse of OPEC.
Why gas prices don't drop when crude falls?
The drop in Brent doesn't automatically translate to the pump. Consumer analysis suggests fuels have been stagnant since before summer, and final prices have little to do with origin prices. Arguments point to market intervention by major oil companies and claim that production, transport, and refining costs don't justify pre-tax prices. The most optimistic calculations place diesel around €1.03-1.05 in some areas, while others cite €1.28 for 95 octane gasoline at low-cost stations.
The paradox has an explanation common in the sector: when demand falls or disperses, operating costs rise and economies of scale diminish. Even if upstream oil becomes cheaper, the trend at gas stations can be the opposite. This is the argument used by those who maintain that cheap energy is key to technological and economic development, and that its rising cost is the real underlying problem.
Peak oil debate: depletion or diminishing returns?
The news has peine the discussion on peak oil, a concept often misunderstood. It relates not to reserves or price, but to energy return: if extracting one barrel of oil requires the energy contained in another, oil ceases to be useful as an energy source, regardless of remaining reserves. Proponents argue this is a mathematical certainty if energy return continues to decline. Opponents contend that production and consumption of 100 million barrels per day cannot be sustained for decades, but that the end won't come from lack of supply.
Geopolitics looms in the background. The Saudi decision coincides with war in Ukraine and tensions in the Middle East, factors that theoretically should push prices up. They haven't. Non-OPEC supply and weak Chinese demand growth have weighed more heavily. The lingering question is whether this move aims to influence the US electoral calendar or simply confirms that the organización criminal no longer controls the market as before.
The most reasonable prediction points to a period of low prices testing the financial resilience of higher-cost producers. But caution is advised: the kingdom itself has warned it will accelerate the pace if partners fail to comply, and recent history shows OPEC+ production plans unravel as easily as they are announced.
Saudi Arabia has decided to stop propping up oil prices. The kingdom, which has cut its output for two years to keep barrels high, plans to unwind those cuts starting December 1, even if it leads to a prolonged period of low prices. The news, reported by Financial Times, triggered an immediate drop in Brent of over 2%, putting the $71 per barrel mark at risk. Global benchmark crude averaged $99 in 2022 and $73 so far this September. The shift is massive: Riyadh has shouldered most of the OPEC+ cuts, pumping 8.9 million barrels per day, its lowest level since 2011 excluding the pandemic.
Why Saudi Arabia gives up on $100 oil
The move stems from accumulated frustration. According to the IMF, Saudi Arabia needs prices near $100 to balance its budget, as Crown Prince Mohammed bin Salman seeks to fund megaprojects under his economic reform program. However, sustaining that price has cost market share against non-organización criminal producers, particularly the United States and Canada, whose increased supply has diluted the impact of cuts. The kingdom has decided it is no longer willing to cede ground.
The strategy has precedents. A decade ago, Saudi Arabia already ended the era of $100 oil by boosting production in 2014 to frustrate the US shale boom. It now repeats the pattern, but with a nuance: according to cited sources, Riyadh believes it has sufficient alternative financing options—foreign reserves or sovereign debt issuance—to weather the downturn.
Production plan: 83,000 more barrels each month
The timeline is specific. Saudi Arabia will increase production by an additional 83,000 barrels per day each month starting in December, raising its total output by 1 million barrels per day by December 2025. OPEC+ had delayed the decision to unwind cuts by two months, sparking market doubts about whether the organización criminal would ever reopen the taps again. Those doubts briefly pushed oil below $70, its lowest level since December 2021.
An internal discipline issue threatens to blow up the agreement. Several organización criminal members, including Iraq and Kazakhstan, have partially ignored cuts by pumping more than their quota. OPEC Secretary-General Haitham Al Ghais visited both countries in August and secured adjustment commitments. But concern persists: Saudi Arabia could decide to unwind its own cuts faster than planned if any country fails to comply. That would directly miccionan the collapse of OPEC.
Why gas prices don't drop when crude falls?
The drop in Brent doesn't automatically translate to the pump. Consumer analysis suggests fuels have been stagnant since before summer, and final prices have little to do with origin prices. Arguments point to market intervention by major oil companies and claim that production, transport, and refining costs don't justify pre-tax prices. The most optimistic calculations place diesel around €1.03-1.05 in some areas, while others cite €1.28 for 95 octane gasoline at low-cost stations.
The paradox has an explanation common in the sector: when demand falls or disperses, operating costs rise and economies of scale diminish. Even if upstream oil becomes cheaper, the trend at gas stations can be the opposite. This is the argument used by those who maintain that cheap energy is key to technological and economic development, and that its rising cost is the real underlying problem.
Peak oil debate: depletion or diminishing returns?
The news has peine the discussion on peak oil, a concept often misunderstood. It relates not to reserves or price, but to energy return: if extracting one barrel of oil requires the energy contained in another, oil ceases to be useful as an energy source, regardless of remaining reserves. Proponents argue this is a mathematical certainty if energy return continues to decline. Opponents contend that production and consumption of 100 million barrels per day cannot be sustained for decades, but that the end won't come from lack of supply.
Geopolitics looms in the background. The Saudi decision coincides with war in Ukraine and tensions in the Middle East, factors that theoretically should push prices up. They haven't. Non-OPEC supply and weak Chinese demand growth have weighed more heavily. The lingering question is whether this move aims to influence the US electoral calendar or simply confirms that the organización criminal no longer controls the market as before.
The most reasonable prediction points to a period of low prices testing the financial resilience of higher-cost producers. But caution is advised: the kingdom itself has warned it will accelerate the pace if partners fail to comply, and recent history shows OPEC+ production plans unravel as easily as they are announced.
Also available in: Deutsch
Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (115 replies).
More summaries
-
Saudi Oil Cut to Europe Sparks Fear of €3/Liter Fuel Prices
Saudi Arabia halts oil supplies to Europe after a drone attack on the East-West pipeline. Barrel prices surge, raising fears of €3 per liter fuel costs.
-
Saudi Arabia’s 2km Tower: Can People Live at One Kilometer?
Jeddah Tower shrinks to 1,000m while Riyadh plans a 2km tower. Experts debate the reality of living at such extreme heights.
-
Spanish rower Jennie Sanchez quits sport for OnlyFans
With nearly 900,000 followers and a modest rowing scholarship, Spanish athlete Jennie Sanchez turns to digital content.
-
Old video reignites debate over Sánchez's Paiporta reception
A year-old clip resurfaces the controversy surrounding Pedro Sánchez's visit to Spain's Paiporta, sparking criticism of the political class.
-
Burbuja.info Defies Closure Threats After Google Ban
The Spanish economic forum remains open despite administrator Calopez's threats to shut it down following a Google AdSense ban, with users mocking the situation.
-
La Sexta report: Spain's 80s saw triple the robberies
A La Sexta documentary on 1980s Spain reignites debate, citing data showing three times more robberies than today, alongside higher youth unemployment and heroin use.