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Saudi Arabia could ‘flush’ the oil market with a flood of supply to regain control over prices in the face of rising US production, crude expert says

  • Saudi Arabia may “flush” the market with a flood of supply that would sink prices, an expert said.
  • That comes as OPEC+ concluded its latest meeting where members pledged voluntary production cuts without giving firm commitments.
  • Meanwhile, US crude output has been on a tear this year, hitting new record highs.

Saudi Arabia may flood the market with more oil supplies, reversing its production curbs, as the world’s top crude exporter tries to regain control of prices, an energy market veteran said.

That comes as OPEC+ concluded its latest meeting where members pledged voluntary production cuts without giving firm commitments, prompting oil prices to fall.

“We’ve more or less been saying potentially Saudi needs to just flush this thing out,” Paul Sankey from Sankey Research told CNBC on Friday.

He estimated that Saudi Arabia has capacity to ramp up its output by an additional 2.5 million barrels a day.

For now, OPEC’s de factor leader is trying to prop up crude by pumping less. On Thursday, it extended its cut of 1 million barrel per day into the first quarter.

But Sankey noted Saudi Arabia shocked markets in 2014, when it similarly tried to flush the market by sinking crude prices from highs of around $110 a barrel to $50.

The drop in prices eventually forced higher-cost producers to exit the market as pumping was no longer profitable. Meanwhile, Saudi Arabia continued to pump as it was better able to withstand lower prices. As supplies from its rivals disappeared, the kingdom was able to regain traction over prices.

https://finance.yahoo.com/news/saudi-arabia-could-flush-oil-053428962.html

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