Saudi Arabia's influential royal Prince Turki al-Faisal al-Saud has said the kingdom would only consider cutting oil production if Iran, Russia and the US agreed to match those cuts because it wants to protect its market share.
Speaking in London, the Prince who is a senior Saudi royal and the former head of the country's spy agency, said that the kingdom would not repeat previous mistakes of surrendering its share of the global market for crude to its rivals. His remarks come just days after a controversial meeting of the Organisation of Petroleum Exporting Countries (Opec), when the group appeared split over a decision to keep producing at current levels.
"The kingdom is not going to give up market share at this time to anybody and allow - whether it is Russia, Nigeria, or Iran or other places - to sell oil to Saudi customer," said Prince Turki, who has also held Saudi Arabia top overseas diplomatic post as the kingdom's ambassador to the US.
Prince Turki added that Saudi Arabia and other producers would only consider adjusting production if other members of Opec adhered to the group's quotas and stopped making "under the table" deals to sell crude in barbed remarks apparently aimed at rivals Iran.
The remarks by the outspoken Saudi royal will add to the view that the kingdom - the world's largest oil exporter - is now locked in a bitter oil price war with the likes of Russia, Iran and shale oil drillers in North America. Oil has fallen by over 30pc since June to trade at around $70 per barrel with some analysts suggesting the level could fall further to as low as $40 per barrel.
There you have it. The Saudis obviously have no love for Russia, Iran or US shale oil producers. They are not just commercial rivals but enemies in a costly war for oil producers.
What are the likely consequences?
The oil market is a breaking situation, in news jargon, so there are a number of short to medium-term possible outcomes. Nevertheless, here are my current thoughts, including for the longer term:
1) Russia’s economy implodes, hopefully without creating havoc for other European nations.
2) Iran tightens its belt, meaning that its regional ambitions are curtailed, which is what the Saudis want.
3) Heavily indebted US shale producers go under, causing some problems for banks but the rest of the economy is better off with lower oil prices.
4) Saudi Arabia experiences a big drawdown from its strategic reserves of cash but can survive lower oil prices for far longer than most other OPEC producers.
5) Oil importing countries benefit from the windfall of lower energy prices.
6) I do not think Brent crude prices will fall to $40 but they will have trouble sustaining rallies back above $80, without significant concerns over a reduction in oil supplies, whatever the causes.
7) This is a defining moment in history – OPEC and other oil producers will have nothing like their control over this market seen for over five decades.
8) The very real prospect of lower energy costs in real terms remains one of this service’s key reasons for forecasting a secular bull market in equities.Back to top