Shafaq News/ Saudi Arabia's anger at Kazakhstan and otherover producing nations was the key driver behind a shockdecisionbythe OPEC+ oil group to open taps on Thursday and might not be reversed even ifoil prices fall further, three OPEC+ sources told Reuters.
Saudi Arabia has been an aggressive supporter of productioncontrol to balance the market in the last five years as its budget requires oilprices of around $90 per barrel. Thursday's decision represents a majordeparture from those policies.
For the past several months, Saudi Arabia has been pushingKazakhstan and Iraq to improve compliance with production cuts, threatening tootherwise start ramping up its oil output.
Instead, Kazakhstan showed record pumping figures monthafter month as U.S. firms Chevron and Exxon Mobil expanded production at thekey field in the country. Iraq was slow to curtail its volumes too.
The warning shot to the cheaters was fired a month ago, whenOPEC+decidedtostart modest monthly production increases to the tune of 130,000 barrels perday from April against market expectations it would keep output steady.
But as cheating worsened over the past month, Saudi Arabiafired a bombshell by pushing the OPEC+ group to release 411,000 bpd into themarket in May, three times more than expected and representing around 0.4% ofglobal supply.
On Friday, oil prices plunged 8% to below $65 per barrel,their lowest since the midst of the coronavirus pandemic in 2021, on U.S.tariffs, China's retaliation to U.S. tariffs and OPEC+ decision to speed upproduction hikes.
OPEC+ might take no action to reverse steep output hikeseven if oil prices drop below $60 per barrel, one of the three OPEC+ sourcesfamiliar with Thursday's discussions said. He asked not to be named due tosensitivity of discussions.
A second sourcefamiliar with the deliberations on Thursday said the message from Saudi Energy MinisterPrince Abdulaziz bin Salman was that members needed to stick to their targetsor more production increases would follow.
OPEC+ and the Saudi energy ministry did not immediatelyrespond to a request for comment.
The first source said low prices would hurt nations bothinside and outside OPEC+ and hence all producers would take actions one way oranother to limit production.
All three sources said they would not call Thursday'sproduction increase a price war yet even though it has revived memories ofSaudi Arabia's clash with Russia for market share in 2020 and OPEC's clash withU.S. shale in 2014-2015.
(Reuters)