Worst-Case Scenarios Facing Saudi Regime
Worst-Case Scenarios Facing Saudi Regime

Worst-Case Scenarios Facing Saudi Regime

Worst-Case Scenarios Facing Saudi Regime

Saudi Arabia faces the prospect of much deeper—and financially painful—oil production cuts after Iraq joined the queue of group members seeking immunity from the deal hatched in Algiers.

In addition to Iraq, the second-biggest exporter in the group, Iran has already sought to exclude itself. Output is also recovering from fields in Nigeria and Libya, two more countries that were exempted from the Algiers deal because violence has wrought havoc in their oil industries. Taken together, more than a third of OPEC’s production now stand outside the plan, Bloomberg reported.

The worsening OPEC equation presents Saudi Arabia with a difficult choice after its Algiers U-turn: carry a greater burden within the group, ceding market share to other producers, or lose credibility by softening the terms of the deal.

In a worst-case scenario, Saudi Arabia will have to cut crude production by more than 1 million barrels per day, sending the kingdom’s output to a two-year low.

In Algiers, OPEC agreed to reduce its production to a range of between 32.5 and 33 million bpd.

The group agreed that Libya, Nigeria and Iran should receive special treatment as they are seeking to increase their production after experiencing disruptions due to internal violence, sabotage and sanctions.

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