How Will the Saudis Play Their Oil Hand Now?

The Hamas attack on Israel that derailed Saudi Arabian Crown Prince Mohammed bin Salman’s principal diplomatic initiative — a three-way deal with the US and Israel — and scrambled the regional political landscape has left one thing unchanged: Riyadh’s influence over the global oil market.

For the last year, Saudi Arabia has cut production to boost prices, including a unilateral 10% reduction in output on top of OPEC-negotiated curbs. Although the market has relentlessly focused – wrongly — on perceived weakness in demand growth, the truth is Riyadh faced unexpected supply from countries under Western sanctions, notably Iran but also Venezuela and Russia. Since October 2022, Iran has boosted its production by as much as 700,000 barrels per day — the second-largest source of incremental oil supply this year, behind only US shale.