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Saudi Arabia unlikely to take strong action to boost oil prices

The oil cartel, OPEC, is likely to reach some sort of face-saving deal to cut oil output at its meeting next week, but we think claims that Saudi Arabia has abandoned its strategy of protecting its share of the oil market are wide of the mark. As we argue in this Focus, the Kingdom is unlikely to take aggressive action to support oil prices over the coming years. Since oil prices started to fall in mid-2014, the Kingdom has raised output as policymakers’ focus has shifted to protecting market share in the face of stiff competition from shale producers and rising output from other major oil exporters, notably Iran.   Recently, Saudi policymakers have cooled their opposition to an output deal with other oil producers, paving the way for OPEC to reach a tentative deal to cut production. As a result, some have argued that the Kingdom has conceded defeat in the battle against high-cost producers and is reverting to its role as swing producer. But we don’t think the Saudis have abandoned their “market share” policy altogether and are unlikely to do so in the near-future.

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