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ENB Pub Note: This is an excellent article from Irina Slav at Oilprice.com. I like the phrase “Embracing the Glut to Win the Long Game.” You must also subscribe to Irina’s Substack. She is right on the money, and it adds validity to Josh Young’s opinion that the longer oil prices are low, the more they will react like a rubber band going higher for longer.
Saudi triggering a further decline in oil prices when Aramco’s breakeven is $77+ and Saudi’s fiscal breakeven is closer to $95 …
seems irrational and unlikely https://t.co/MS7JalAFob
— Josh Young (@Josh_Young_1) May 4, 2025
Oil markets took another hit this weekend as OPEC+ threw another curveball. In a virtual meeting Saturday, the group’s top producers—Saudi Arabia and Russia—announced a 411,000 barrels per day (bpd) output hike for June, nearly triple what had originally been planned. The move follows a similar surge for May and signals a stark strategic pivot from defending prices to flooding the market.
At first glance, this looks like a crackdown on quota violators. Kazakhstan and Iraq have repeatedly overproduced despite OPEC+ curbs. Kazakhstan alone overshot its March quota by a staggering 422,000 bpd, hitting a record 2.12 million bpd. With enforcement efforts having failed, Saudi Arabia seems to be letting prices do the disciplining.
But analysts like Bloomberg’s Javier Blas argue this is about more than punishing cheaters. It may reflect a deeper shift in Riyadh’s approach to oil markets. Rather than resist falling prices, the Saudis appear to be steering into them.
For Saudi Arabia, a kingdom that needs oil above $90 to balance its budget, the move looks bold—even reckless. But Riyadh may be betting that short-term pain yields long-term gain. Lower prices could reclaim lost market share and put pressure on high-cost producers like U.S. shale. It may also be a pre-emptive strike ahead of any Trump-led lifting of sanctions on Iran or Venezuela, both of which would bring more oil into an already oversupplied market.
Meanwhile, oil bulls are throwing in the towel. Standard Chartered slashed its 2025 Brent forecast by $16 to $61/bbl, citing tariff escalations and the OPEC+ pivot. Goldman Sachs and JPMorgan have likewise downgraded price and growth expectations, warning of elevated recession risk.
Saudi Arabia isn’t just reacting. It’s adapting—trading short-term revenue for strategic positioning. This is not a war cry. It’s a recalibration. And it could change the market for years to come.
By Irina Slav for Oilprice.com
The post Saudi Arabia’s New Oil Play – Embracing the Glut to Win the Long Game appeared first on Energy News Beat.
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