Saudi Arabia absorbs lower oil prices

As the price of Brent crude continues its seemingly relentless slide – down more than 20 per cent since a mid-June high of $115 a barrel to $90 on Wednesday – a number of conspiracy theories have started to do the rounds. Most focus on Saudi Arabia – Opec’s largest producer – and its apparent reluctance to cut production in any meaningful way to support the oil price. For better or worse, the consensus view is that Saudi Arabia is trying to grab (or at least protect) market share by maintaining production and lowering its official selling prices to Asia – arguably the only growth market for oil. ‘The clear conclusion to be drawn from Saudi pricing policy is that it will compete for market share and no longer sees itself as the swing producer for more than perhaps 500,000 barrels a day, which in the context of the potential surplus is not significant,’ says David Hufton, of PVM, a brokerage.  But some oil market watchers are not convinced by this explanation. They think there is more to Saudi Arabia’s reluctance to lower production, according to ft.com