What to watch to warn of Saudi Arabia potentially flooding the market with cheap oil

Dow Jones / Market Watch (gated) have a good piece up citing Capital Economics on why the Saudis could flood the market with cheap oil, and to watch for the signs of this happening.

In summary

• Saudi Arabia may increase oil production due to deteriorating cohesion among OPEC+ members
• OPEC+ producers have been overproducing by up to 800,000 barrels per day despite voluntary production cuts
• Saudi oil minister warned that prices could drop to $50 a barrel if members don’t comply with cuts, though OPEC denied this warning
• Capital Economics suggests Saudi Arabia is frustrated and may use alternative funding methods to withstand lower prices, as seen in past policy shifts
• Increasing production could help Saudi Arabia regain market share but would require a significant price fall below $50 a barrel
• The chance of Saudi Arabia ramping up production by end-2025 has increased to 30%.
• The December OPEC+ meeting will be crucial, with past meetings signaling policy shifts in 2014 and 2020.

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The OPEC and non-OPEC Ministerial meeting is on 1 December

ps. News of (price drop) relevance to oil from earlier:

• Netanyahu told US that Israel will strike Iranian military, not nuclear or oil, targets

This article was written by Eamonn Sheridan at www.forexlive.com.