Over the weekend, the kingdom’s strategy
dramatically pivoted when Russia refused to
cooperate on further and deeper production
cuts. It was expected that other OPEC member-
states would follow suit and increase production
in response to Saudi Arabia’s moves.
Abu Dhabi’s ADNOC said it was responding to
current market conditions and would increase
output from about 3 million barrels to over 4
million barrels of oil a day starting next month.
In addition, the company said it will accelerate
plans for its 5 million barrel per day production
capacity target.
By increasing output and production, and
slashing its official selling prices to Asia, analysts
say it appears Saudi Arabia is now looking to
pressure Russia by dominating market share,
since it was unable to secure market price.
The price war pushed the price of crude
down 25% on Monday, the sharpest decline
seen since the 1991 Gulf War. The price of
international benchmark Brent crude recovered
some on Tuesday and was trading around $36 a
barrel on Thursday.
“The most likely outcome of this crisis is
entrenchment into a painful process that
lasts several weeks or months, until prices are
low enough to change fundamental views
in Moscow and Riyadh back to some form
of compromise,” according to political risk
consulting firm Eurasia Group.
Eurasia Group said that the price war will,
meanwhile, exert pressure on U.S. crude exports,
which recently hit a record 4 million barrels
per day, because they will struggle to get their
cargoes to clients at profit.