Oil prices collapse while Saudi Arabia throws in the towel on the restriction offer

On Friday, oil prices continued their free fall while the market absorbed a double blow of shock after US President Donald Trump announced radical world rates and the OPEC + Alliance decided to massively increase crude production.

The Brent price, the international index, fell by more than 11% in two days, plunging $ 74 per barrel at the start of this week at around $ 66 a barrel. The drop has put crude prices at their lowest levels since 2021.

The sale shows how Trump’s trade war already triggers side effects on the Middle East.

The Gulf States, notably Saudi Arabia, Kuwait and the United Arab Emirats, have fared on Wednesday through Trump’s trade with only 10% prices, but they are exposed to fears of a slow world economy – which means less raw demand and, therefore, lower prices.

At the same time, OPEC +, an alliance of energy producers led by Saudi Arabia and Russia, added to the sale by abandoning its position to try to support the prices by restoring the offer.

On Thursday, OPEC + shocked the energy world by announcing during a routine call that it would triple an increase in production scheduled for May.

Saudi Arabia was the main supporter of the restriction of oil supply in order to lower prices. Thursday’s decision is a question from the front for the Saudi Minister of Energy Abdulaziz Nin Salman, who has acquired a combative reputation, warning the speculators of the market that they “would have a revival like hell” if they doubted his desire to starve from the petroleum supplies market.

But energy analysts have been warning for over a year that Saudi Arabia is in an untenable position.

Saudi Arabia throws in the sponge

Saudi Arabia has brought the weight of supply of supply, losing market share on markets like China against Iran and India to Russia. Meanwhile, OPEC members and water has successfully pressure to increase their quota limits, benefiting from higher prices.

Iran and Russia have also increased exports. Energy analysts say that Saudi Arabia may have thrown the towel and have dropped prices to punish the so-called “horsemen” and enforce compliance. Saudi Arabia is particularly upset by Kazakhstan and Iraq, which have produced a record production of crude in defiance of their OPEC quotas.

The risks for Saudi Arabia that these benefits are deep and are amplified by the threat of the world’s tariffs.

The kingdom plays so that it can corral OPEC members in obedience, as is a trade war fueling the risks of recession.

Saudi Arabia needs oil at $ 90 per barrel to balance its budget, according to the International Monetary Fund.

The kingdom already reduces mega-projects like Neom and tightens its stock market ropes on consulting companies which have raked a windfall which advises on the agenda of the Crown Prince Mohammed Bin Salman 2030 to redo the Saudi economy.

Saudi Arabia also has a multitude of poor neighbors such as Lebanon, Egypt and Syria, which demand financial assistance. The United States also wants the Gulf States to fund Gaza’s reconstruction of Israeli bombing.

In the short term, Saudi Arabia will gain good will with Trump, who has publicly called OPEC to increase supply. The drop in oil prices could buzz the inflationary impacts of Trump prices.

The worst case for Saudi Arabia is that the prices of oil decreasing, risking a price war like the one that broke out in 2020 between Russia and the kingdom during the coronavirus pandemic.