• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 9 days Does Toyota Know Something That We Don’t?
  • 3 days America should go after China but it should be done in a wise way.
  • 9 days World could get rid of Putin and Russia but nobody is bold enough
  • 11 days China is using Chinese Names of Cities on their Border with Russia.
  • 2 mins Even Shell Agrees with Climate Change!
  • 11 days CHINA Economy Disaster - Employee Shortages, Retirement Age, Birth Rate & Ageing Population
  • 12 days Russian Officials Voice Concerns About Chinese-Funded Rail Line
  • 1 day Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 2 days How Far Have We Really Gotten With Alternative Energy
  • 12 days Putin and Xi Bet on the Global South
  • 12 days "(Another) Putin Critic 'Falls' Out Of Window, Dies"
  • 12 days CHINA Economy IMPLODING - Fastest Price Fall in 14 Years & Stock Market Crashes to 5 Year Low
Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

How Much Oil Production Will The Saudis Cut?

Donald Trump continues to take credit for lowering oil prices.

Trump’s tweetstorm complicates the OPEC+ meeting in Vienna next week. Trump is very much leaning on Saudi Arabia, pressuring them not to cut output. And he has gone out of his way to protect the Saudis even though the CIA has concluded that crown prince Mohammed bin Salman likely ordered the murder of journalist Jamal Khashoggi. He clearly expects the Saudis to return the favor by not cutting production.

This puts Riyadh in a bind. Saudi Arabia needs to patch up its relationship with the West, but it also can ill-afford oil prices at current levels. Saudi Arabia needs Brent to trade north of $80 per barrel for its budget to breakeven. Massive budget deficits during the 2014-2016 downturn help explain Riyadh’s about-face in late 2016 – they had tried to force high-cost drillers out of the market by crashing oil prices, but ultimately caved and engineered an OPEC+ production cut to push prices back up. Related: How President Trump Is Undermining U.S. Oil Producers

Little has changed since then. Saudi Arabia’s spending commitments are still large, and that is before we even take into account MbS’ overly-hyped economic reform proposals. Saudi Aramco is also trying to figure out how to transform itself for the long haul. There was the much-ballyhooed Aramco IPO that has since been shelved. There were the plans for Aramco to issue one of the largest corporate bond offerings ever in order to finance a major stake in Sabic, the state-owned Saudi chemical firm. That initiative was also recently abandoned. Now, Aramco’s CEO says the company will spend $500 billion to transform itself into a global refiner and chemical maker.

That is going to require a lot of money, which means that the Saudi government desperately needs a rebound in oil prices. But that goal could run afoul of the American president, who just bailed them out over the Khashoggi murder.

The murder of Jamal Khashoggi put a lot more in jeopardy than merely low oil prices. MbS, after several years of glowing press in the West, put his country’s strategic alliance with the U.S. at risk when he (according to the CIA) ordered the assassination of Khashoggi. Now, with only Trump vouching for MbS, amidst a push by the U.S. foreign policy establishment to throw the crown prince under the bus, the Saudis have little room to anger the White House. That potentially means giving up on the more aggressive oil option floated a few weeks ago – a cut in OPEC+ production on the order of 1.4 mb/d. Related: The Biggest Losers Of The Current Oil Price Slump

The Wall Street Journal reports that the latest plan hatched in Riyadh is a so-called “quiet cut” in Vienna, which consists of a re-dedication to the original OPEC+ production cuts, emphasizing a return to 100 percent compliance. Because Saudi Arabia is now massively overproducing, by about 1 million barrels per day (mb/d), a return to the prior production target would translate into a sizable 1 mb/d cut.

“It will be still a big cut but less pronounced,” a senior Saudi oil adviser told the WSJ. The report suggested that this plan was “gaining traction among OPEC officials this week.”

The “quiet cut” would be an attempt to thread the needle. It would be small enough that it might keep Trump happy. It would also be small enough that Russia could sign on. Moscow has been more reluctant than the Saudis to slash output. But it would be large enough for Saudi Arabia – and large enough, in theory, to arrest the meltdown in prices.

“It is quite a political move. The last thing Saudi Arabia wants to do at the moment is to risk upsetting Trump,” the senior Saudi oil adviser told the WSJ.


The sudden sensitivity about how its actions are perceived by Washington demonstrates the far-reaching fallout of the Jamal Khashoggi murder. MbS has sacrificed a ton of leverage at the OPEC+ meeting, and more importantly, he has essentially given up full control over Saudi oil policy, for little gain.

“Because of Khashoggi, the Saudis will do anything to make sure Trump doesn’t do anything nasty” to them, an OPEC official told the WSJ.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • citymoments on November 28 2018 said:
    With all due respects to the author, I would like to add the following points for his consideration:

    1. In time of high volatility, we must not loose sight to some very basic facts: The central question we shall ask - what is the primary factor which determines the direction of oil price?

    2. There are three main factors: Economic factor( production cost and supply vs demand), technical factor ( trading technical ) and geopolitical factor ( Trump vs Saudi ). As oil is a physical commodity, so the economic factor supersedes the other two factors in the long run. Sometimes, in the short term, geopolitical factor could play a very significant role effecting the price of oil. The very recent example is: Trump declared Iranian oil sanction, which tricked Saudi and Russia to max their production during the third quarter low season, then dropped the sanction by giving 8 wavers to all Iranian major customers.

    3. It was a super smart move by Trump, though, we must understand Trump as a man, has no power to cap the price of oil in the long run unless you believe he is GOD. If he is able to keep the oil price low, he shall become a life time President, is it wonderful for the whole world to have low oil price if that is the case?

    4. In the long run, the price of oil will only be determined by the scarcity of crude ( no more cheap crude on shore but only off shore, shale oil is not liquid oil like conventional oil, very expensive to produce and extremely high decline rate. WTI at $50 a barrel, USA is selling its precious resources for below its production cost. Shale oil should never be allowed to be produced when oil price is under $55 a barrel).

    5. Saudi, after being tricked by Trump, will have no hesitation to cut the amount of oil they see fit to lift up the oil price above $70. The reason is very simple: the mid term election is over, they no longer need help Trump to keep oil price low to secure the mid term election; the price must be rising above $70 for Saudi to run its economy and pay the big weapon contract to USA; considering the fact it is USA not Saudi which still needs import heavy crude from Middle East, Saudi will still remain the swing producer in the global oil market; therefore, the killing of a journalist will not stop Saudi to act what is necessary for her best interest.

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News