Saudi Arabia's Economic Plan Shows It's Just Not That Into OPEC

OPEC, founded by Saudi Arabia and four other oil-rich developing nations, gained members and geopolitical clout as more producers nationalized their energy resources and created state-run companies to exploit them. By setting production quotas for individual countries the group tried avoid prolonged periods of oversupply.

But over the past three years, under al-naimi’s leadership, Saudi Arabia resolved that OPEC wouldn’t cut output and instead pump as much as they wanted to defend sales against higher-cost crude.

The kingdom raised production to a record in July, exacerbating the glut and leading prices to plunge by more than half. The strategy now seems to be working -- prices have rallied about 80 percent from a 12-year low in January -- giving Saudi Arabia little reason to change course .

“The death of OPEC has been long foretold, but it looks like the Saudi 2030 Vision is really the obituary notice,” said Citigroup’s Kleinman. “The Saudi Aramco IPO, and the presumption that there’s going to be a much higher degree of autonomy within Saudi Arabia -- there’s no real role for OPEC.”

To contact the reporters on this story: Wael Mahdi in Kuwait at wmahdi@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net ;Nayla Razzouk at nrazzouk2@bloomberg.net Bruce Stanley


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Rudolf Huber  |  May 27, 2016
LNG - but it's going to take a little while. Still, the direction is clear.
James Moody  |  May 27, 2016
Oils day are numbered........ Really, what is going to repace it?
Rudolf Huber  |  May 25, 2016
OPEC has lost much of its influence anyhow so if it cannot re-infuse itself with new purpose, then member countries cannot be blamed for changing their orientations. Oil's days look numbered - maybe the Saudis have come around to accept this fact and want to quit before the party becomes eternal stalemate.


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