for Saudi Arabia
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A clumsy exit strategy, producers cheating on quotas, or a rapid response from U.S. shale producers could undermine the effectiveness of the deal. Conversely, the potential for higher prices is also a stark possibility.
An extension is virtually guaranteed but today’s overwhelming consensus masks real divisions, complications and misgivings.
As OPEC and its non-OPEC allies gather in Vienna this week, it will mark the three-year anniversary of the cartel’s pivotal decision to produce all out and allow prices to fall sharply.
OPEC will attempt to manage perceptions in both the physical and financial markets—but given its track record, it will not likely produce stability and certainty, but instead ambiguity and volatility.
When producers that are inherently prone to conflict and resource nationalism lose supply, output will most likely not return to previous levels.
One consequence of Saudi Arabia's “anti-corruption” purge is a more hawkish foreign policy and increased tension with Iran. With the U.S.’s national security and economic well-being vulnerable to instability in Saudi Arabia and the Middle East, measures to strengthen energy security and reduce oil dependence are increasingly imperative.
After more than a quarter-century of estrangement, Saudi Arabia and Iraq are just getting started in repairing their relationship.
The petrodollar system isn’t going to be turned upside down overnight, but China’s rising status will continue to disrupt the status quo, sending a powerful message that the country seeks to consolidate its strength as an economic superpower.
Despite the effects from the OPEC production cut and austerity measures, Saudi Arabia can ride out the current economic headwinds without having to switch market strategy. That outcome, though, is not a certainty since there are factors that could further negatively impact the Saudi economy.