Saudi minister says crude prices could fall 33% if OPEC members don’t stop pumping so much

Saudi Arabia’s oil minister says oil prices could fall as low as $50 per barrel if OPEC+ keeps overproducing, according to a Wall Street Journal report.

Prince Abdulaziz bin Salman’s forecast, made during a conference call last week, was regarded as an indirect threat aimed at others in the oil coalition. According to delegates who spoke with WSJ, it signals Riyadh’s readiness to launch a price war if the cartel’s outflows aren’t restrained.

One delegate summarized the minister’s remarks bluntly: “Some better shut up and respect their commitments toward OPEC+.”

$50 per barrel oil would drag Brent crude, the international benchmark, down 33% from current levels.

The commodity was trading around $74 per barrel as of Wednesday morning. Crude markets have soared this week amid escalating tensions in the Middle East, as Israel’s ground offensive into Lebanon prompted a heavy missile attack from Iran.

Though fear grew that this would disrupt regional production, geopolitical tensions have had a limited impact on crude this year. Instead, prices have slumped on waning demand and an excessive supply glut, pushing Brent down 16% since peaking in April.

That’s despite OPEC’s efforts to keep prices elevated by slashing output. Although numerous production cuts have been announced since mid-2023, this has only cost the coalition market share, without arresting prices.

Part of the issue is that members are not sticking to their pledged cuts. The Saudi minister called out Iraq, which surpassed its quota by 400,000 barrels per day in August, according to S&P Global Ratings data. Kazakhstan, which overproduced by 120,000 barrels a day, was also singled out.

Although Saudi Arabia’s economy depends on higher pricing, a report from last week suggests that the kingdom might be ready to boost its oil output and bolster its market share.

One source told the Financial Times that Riyadh would ditch its curbs quicker than expected if countries such as Iraq and Kazakhstan keep producing above their quota.

This decision will become public on December 1, when OPEC is scheduled to determine whether to increase production. Though it was initially meant to do so in October, the decision was delayed.

Saudi Arabia has a history of shaking up the market by increasing production. The OPEC leader caused prices to fall below $10 per barrel in 1986 after boosting output to penalize other producers.