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Julian Lee

The Real Price of Saudi Arabia’s Surprise Oil Cuts

Higher prices and other savings will help offset the cost of output cuts.

A man with a surprise. — A man with a surprise.
Photographer: Stefan Wermuth/Bloomberg

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January 7, 2021, 5:00 AM UTC

Saudi Arabia’s $3 billion insurance premium to protect against falling oil prices will end up being a lot smaller than it seems at first sight. That holds even if demand turns out to be stronger than the kingdom seems to fear.

This week’s OPEC+ meeting of oil producers broke up in disarray on Monday night, with Russia pressing for output targets to be raised by 500,000 barrels a day in February. Most other members wanted to leave them unchanged as the coronavirus continues to roil global economies and the recovery in demand remains fragile.