The possibility that Saudi Arabia will open the “floodgates” on its oil production has climbed in recent weeks, according to a report from Capital Economics released Monday.
“Although the focus in the oil market has shifted to geopolitical risks and potential short-term supply disruptions, just as importantly, we think the possibility that Saudi Arabia could open the floodgates has increased in recent weeks alongside reports of deteriorating cohesion among OPEC+ members,” Kieran Tompkins, climate and commodities economist at Capital Economics, wrote in Monday’s note.
The risks to the view that Saudi Arabia opens the spigots and ramps up output at some point have increased to around a 30% chance by the end of 2025, he said.
The OPEC+ meeting scheduled for Dec. 1 will be key. “One of the lessons from 2014 and 2020 was that a breakdown of negotiations around these meetings led to [the Saudis] shifting tack,” Tompkins said. “The December meeting could be a potential flashpoint.”