Saudi Jumps Hurdles To Deliver OPEC Deal
Bloomberg Businessweek Middle East|December 16, 2018

Saudi Arabia pulled off what many skeptics had thought impossible and implemented oil production cuts

Saudi Arabia’s energy minister emerged from days of heated OPEC talks joking that he wasn’t an easy man to be friends with.

Yet, the deal Khalid Al-Falih hammered out to reduce production by 1.2 million barrels a day, which sent oil prices soaring on December 7, was based on Saudi Arabia shouldering the lion’s share of the cuts. It also relied, to an unprecedented extent, on Russia to broker an agreement between the Saudis and their archrivals, Iran, and acknowledged implicitly that there’s little the kingdom could do to hurt surging U.S. oil shale without causing itself pain.

“Saudi economic self-interest trumps Trump,’’ said Mike Rothman, president of Cornerstone Analytics Ltd., a veteran of three decades of OPEC meetings.

The outcome of the marathon talks in Vienna shows how OPEC was able to pull offa juggling act. Al-Falih’s dilemma: cut production and anger President Donald Trump, or let oil prices plunge and risk damage to a Saudi budget that requires oil prices above $70 a barrel in 2019.

“Low prices are actually not good for the U.S. economy,’’ Al-Falih said, a riposte to Trump’s repeated calls for OPEC to open the taps. “I know for a fact that oil and gas producers in the U.S. are probably breathing a sigh of relief that we’re providing some certainty and visibility for 2019.’’

On Twitter on December 5, Trump urged OPEC not to restrict oil flows, but since then has not publicly addressed the market.

For Al-Falih, the willingness to cut production represented a shift. In a speech last year in Houston, he insisted that his country would not surrender market share to the U.S. The kingdom, he said, supported intervening in the market to address “short-term aberrations’’ and not “longterm structural imbalances.’’

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM BLOOMBERG BUSINESSWEEK MIDDLE EASTView All

The Novo Abides

Mike Novogratz, former Goldman Sachs partner and the loudest crypto bull on Wall Street, has made and lost a fortune on Bitcoin. He’s still all-in.

5 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Weaponizing Uncertainty

Trump’s tariffs were meant to make the U.S. a safe option for businesses looking to expand. It’s not working out that way.

4 mins read
Bloomberg Businessweek Middle East
1 January, 2019

The Immigration Hackers

An Obama-era department of techies is working to streamline paperwork from inside the Trump administration. Results are mixed.

4 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Letter From London, March 2029

A message from post-Brexit Britain about what the 2019 split from the EU hasn’t delivered.

8 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Saudi Weighs More Bank Mergers

Gulf bank consolidation trend gathers pace with Saudi plans.

2 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Money Markets Mixed Over Fed Rate Hikes

There is little agreement among commentators as to whether the Fed will continue to hike rates in 2019.

1 min read
Bloomberg Businessweek Middle East
1 January, 2019

Hey, Paul Ryan, What's Up? Budget Deficits

The professed fiscal hawk leaves behind a legacy of unsustainable shortfalls.

4 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Dell EMC Bullish On 2019 Outlook

Cloud and technology giant plans further expansion in the Middle East.

2 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Artificial Intelligence Has Some Explaining To Do

Software makers offer more transparent machine-learning tools—but there’s a trade-off.

4 mins read
Bloomberg Businessweek Middle East
1 January, 2019

What Buffalo Got, And Didn't Get, When Tesla Came To Town

After $750 million in subsidies and years of delays, critics say Elon Musk hasn’t done enough for his solar panel factory

10+ mins read
Bloomberg Businessweek Middle East
December 16, 2018