Saudi Arabia recently announced that it will begin increasing oil production starting in December. For the past few years, the kingdom has been focused on cutting production in a bid to push oil prices higher. However, these efforts have not had the desired effect, as global oil prices remained stubbornly low, even as supply was reduced. As a result, Saudi Arabia has now decided to shift its approach, moving from a policy of reduction to increasing output.

The Struggle of Production Cuts

 Saudi Arabia has been one of the leading voices behind oil production cuts, particularly within the OPEC+ group, where it holds considerable influence. Currently, Saudi Arabia produces around 8.9 million barrels of oil per day, but from December, the kingdom plans to gradually raise production by adding 83,000 barrels per day each month. By the end of this increase, Saudi Arabia will be producing about 9.9 million barrels per day, marking an 11% rise in output.

 For years, Saudi Arabia pushed for production cuts to maintain higher oil prices. This was essential for the kingdom’s economic plans, especially its Vision 2030 initiative, which seeks to diversify the economy away from oil dependence. The massive infrastructure projects and investments planned under Vision 2030 require significant financial resources, and to fund these efforts, Saudi Arabia has aimed for oil prices to remain above $100 per barrel.

Why Production Cuts Failed

 Despite these ambitions, the strategy of cutting production didn’t work as well as Saudi Arabia had hoped. Non-OPEC countries, particularly the U.S., Brazil, and Guyana, ramped up their own oil production, flooding the market with additional supply. In 2022, global oil demand rose by around 1.9 million barrels per day, but new production from these countries increased by 2.5 million barrels per day, creating an oversupply. This excess supply kept prices low, nullifying the effects of the cuts by OPEC+.

 This created tensions within OPEC+. While some member countries like Angola even chose to exit the cartel, others, like Iraq and Kazakhstan, failed to stick to their production cut commitments. The biggest issue, however, was Russia, a key OPEC+ member. Despite pledging to cut production, Russia continued to overproduce, selling more oil to compensate for its economic struggles amid Western sanctions.

 Saudi Arabia found itself increasingly frustrated by the lack of compliance from other members, particularly Russia. The effectiveness of the production cuts dwindled, and Saudi Arabia struggled to maintain its leadership position within OPEC+. Despite its own efforts, the kingdom wasn’t able to single-handedly control the global oil market.

The Shift to Increased Production

 By early 2024, Saudi Arabia’s frustrations with the limitations of production cuts came to a head. Despite cuts, the country was finding it difficult to sell its full quota of oil. At one point earlier this year, Saudi Arabia even introduced a blanket $2 per barrel discount to attract buyers. This "discount campaign" underscored the kingdom's struggle to keep its oil competitive amid low demand and higher production costs.

 Faced with declining sales and an oversupplied market, Saudi Arabia ultimately decided that continuing with production cuts was no longer viable. Instead, the kingdom announced plans to increase production, marking a significant shift in its oil strategy.

Global Impact: Oil Prices Expected to Fall

 Saudi Arabia's decision to boost oil production is expected to have a significant impact on global oil prices. In response to the announcement, the price of West Texas Intermediate (WTI) crude oil dropped to $68 per barrel, and some analysts predict that prices could fall further, potentially reaching $50 per barrel in the coming months. This would represent a major decrease in global oil prices, which could have ripple effects across various sectors of the global economy.

A Broader Trend of National Survival Strategies

 Saudi Arabia’s shift in oil strategy reflects a broader global trend: major powers are increasingly turning inward and focusing on their own survival strategies. In recent years, the U.S. has adopted an energy independence stance, prioritizing domestic production over reliance on foreign imports. Similarly, Iran, once a major force in the Middle East, has been less aggressive on the international stage, largely due to internal challenges.

 The sense of global cooperation and leadership, particularly among nations that once played dominant roles in key sectors, seems to be waning. This shift towards national self-interest is seen not just in oil-producing countries, but across the broader geopolitical landscape.

 In summary, Saudi Arabia’s decision to pivot from production cuts to increases highlights the changing dynamics of the global oil market and the limitations of collective action in an increasingly fragmented world. With global demand uncertain and new oil producers entering the market, the once dominant influence of OPEC+ is fading, and individual nations are increasingly pursuing their own economic and energy strategies.