Saudi Arabia's Surprising Oil Stance Could Signal Lasting Price Change
It's possible that the oil price will never rally as some expect with energy demand geopolitics changing so much.
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Last week, OPEC+ had its meeting where it was decided by the eight members of the wider group that had implemented voluntary production cuts initially to raise output by 411,000 barrels per day (BPD) in July, the third straight month of the same increase.
Most of this increase will be met by Saudi Arabia and the United Arab Emirates (UAE). During the meeting, there was talk of perhaps a pause by Russia, who likes — or rather needs — higher prices to pay for its expensive war. The price of brent oil rallied to $65 per barrel (BBL) as the market feared they would release more.
Recently, we saw news that the "kingdom, which holds an increasingly dominant position within OPEC+, wants the group to add at least 411,000 barrels a day in August and potentially September." So, the question must be asked: Why is Saudi Arabia so adamant to release more oil at lower prices today?
Oil has been the one commodity that has confused a lot of the commodity analysts, because most of them trust the resolve of OPEC+ and its bigger members to keep the price of oil as high as possible until demand picks up. But the game has changed and the geopolitics have, too.
It is a well-known fact that Saudi Arabia has overspent, given a certain level of oil and assuming that oil would be much higher in the years post-COVID as demand returned. As of 2025, Saudi Arabia's fiscal breakeven oil price is estimated at approximately $90.94, according to the International Monetary Fund (IMF). It was relying on future oil price strength to pay for massive civic projects. Last year taught us that Chinese demand has seen a secular change as it shifts away from fossil fuels into wind, solar and other forms of energy, like LNG. Today, China is sitting on a comfortable amount of inventories so it does not have a pressing need to buy barrels from either OPEC+ or even Russia or Iran. It is extremely price sensitive as when prices fall, it loads up its storage, and when they rise too much, it drains its storage. With more than 5 million BPD or 5% of world demand off the market over the past few years, since April, the OPEC+ eight have now made or announced increases totaling 1.37 million BPD, or 62% of the 2.2 million BPD they aim to add back to the market.
Prices are much lower today and yet Saudi Arabia is insisting on releasing its oil. Perhaps this is a rude awakening that oil demand has changed for good and that it may as well maximize its revenue now before it is too late. Reading between the lines, it seems the kingdom is happy to keep President Trump content in exchange for more deals as seen by all the announcements during Trump's visit. It makes sense to diversify out of oil and into technology and get better terms and conditions with investing in the U.S. One of Trump's main campaign promises was lower oil prices and so it makes sense that Trump would make sure that oil is no longer held back, artificially boosting the price of oil.
Stale bulls keep arguing about low inventories and how that would aid the price of oil. But one must consider that we are in a different time now, China and the U.S. used to be big importers, now they are exporters of products. So, the need to "store" oil is not the same as before.
We have always opined that there is no such thing as "cheap" or a "value" in commodities, it is based on the demand/supply balance. If there is too much, prices will not be able to rally, and can even go negative! That is the beauty of commodities and the extreme volatility they bring, unlike equities that have a book value or floor value.
