Saudi Arabia announced plans to increase its oil production, abandoning the previously sought price of $100 per barrel.
This decision is a significant move that could impact Russia's economy and comes in the wake of Western sanctions imposed on Moscow after its invasion of Ukraine. These sanctions were aimed at diminishing Russia’s war capabilities.
Saudi Arabia, a key ally of Russia within the OPEC group, is making this shift despite previous production cuts intended to stabilize oil prices.
The increase in oil output is anticipated to lower global oil prices, directly affecting Russia, which relies heavily on oil revenue to finance its military operations in Ukraine.
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Crucial to Russia's Budget
Orysia Lutsevych, head of the Ukraine Forum at Chatham House, emphasized that oil and gas remain crucial to Russia's budget.
While Russia has adapted to sanctions and managed to boost its revenues, a substantial decline in global oil prices would exert additional pressure on its budget. With Saudi Arabia ramping up production, the likelihood of lower prices increases, which could cripple Russia's economic stability.
Moreover, Saudi Arabia faces competitive pressures from non-OPEC oil producers like the United States, as well as weakening demand from China.
Despite needing oil prices around $100 per barrel to balance its budget, Saudi Arabia appears willing to sacrifice some price stability to maintain its market share against rising competition.
On September 5, OPEC+ members, including Saudi Arabia, reaffirmed their commitment to production cuts while navigating the complexities of a fluctuating oil market
