Here We Go Again... When Does It End?

Play stupid games, win stupid prizes.

I'm not a conspiracy theorist at all, not even a little bit. But this week just smells strange to me from far too many angles. Bloomberg, FT, and Reuters are all piggybacking on each other's articles and cross-referencing to prove a single point: Saudi is gunning for market share again.

What's asinine about what they are writing is that they are using OPEC+'s own guidance on the current voluntary production cut curtailment as the source for the "potential market share war". Can you imagine any other sector that this type of analysis takes place?

And the ultimate irony in all this is that it was just a month ago when we had the Reuters leak about OPEC+ increasing oil production:

Source: Zerohedge

Here we go again... Seriously, when does it end?

Too many problems with these articles... Where do I start?

There are far too many red flags in the FT article for it to be credible. For starters, anyone who has any connection to the Saudis will never state an oil price target. Dr. Anas Alhajji talked about that in the guest post we published earlier today.

Second, there's a deep misunderstanding with regard to the previous market share wars that many of the generalists are not aware of. We wrote a very detailed article on this eons ago, so it's probably a good time to revisit it.

In the article, we pointed out the following:

The IEA also projected OPEC producers would increase their production capacity by a total of 2.1 mb/d by 2019, with Iraq responsible for most of the production increase and Saudi Arabia only a very small amount. In other words, OPEC's market share was expected to grow by only around 1.0 mb/d but members were going to add two times that much in new capacity (see figure 10.4). OPEC needed to make room not only for shale and oil sands, but also for new production capacity within its ranks. Therefore by forecasting total OPEC production would fall, IEA effectively assumed one or more OPEC members would have to be willing to cut their own supply by around 1.5 mb/d, while others like Iraq and UAE increased, to avoid excessive overall production, which would lead to inventory builds and a price collapse."

The issue with the Saudis has never been about non-OPEC supplies. It has always been about supplies within OPEC. If you go back and revisit the 2020 oil price war, it happened because the Russians failed to agree to the steep production cuts the Saudis were proposing. Similarly, the 2014 market share war was centered around Iraq and Iran increasing production at the expense of the Saudis.

For the Saudis, if members inside OPEC are increasing production, then it sees no need to cut production.