Saudi Arabia indicates they want oil at $70 a barrel: Sources

Saudi Arabia has been signaling for weeks that it is and will be doing whatever it takes to rebalance the oil market by slashing exports and pumping well below its quota under the OPEC+ deal—despite US shale’s persistence.

Yet, while neither the Saudis nor OPEC would officially admit that they are aiming for higher oil prices or a specific price of oil, the combined efforts of the OPEC/non-OPEC group to withhold 1.2 million bpd of supply are targeting a tighter market—and higher oil prices.

Even if higher oil prices are indeed helping U.S. shale producers to pump oil at record levels, OPEC’s largest producer and de facto leader Saudi Arabia reportedly prefers higher oil prices rather than hanging onto its market share.

The Saudis are aiming for at least $70 a barrel Brent Crude because the Kingdom’s budget needs these higher prices, industry sources familiar with Saudi Arabia’s oil policies told Reuters. And they may need even higher than that.

According to estimates from the International Monetary Fund (IMF), the Saudis need much higher oil prices for a budget break even in 2019—at $80-85 a barrel, Jihad Azour, Director of the Middle East and Central Asia Department at the IMF, told Reuters last month.

Oil at $80, however, is sure to draw harsh criticism from U.S. President Donald Trump, whose oil price ‘tolerance threshold’ appears to be Brent above $65. At $80 a barrel, it would also be the beginning of demand destruction at a time when economists and markets are already fretting about slowing economic growth in China and other major economies and the still unresolved U.S.-China trade dispute.

So while the Saudis are probably aware that they can’t afford to push oil prices to their budget break even, the goal, according to Reuters’ sources, is still above the current oil prices. The last time Brent Crude traded at $70 or above was in early November last year, when prices were plummeting from the $80-plus levels from early October.

With U.S. waivers due to expire in early May, Saudi Arabia and OPEC appear to be timing oil policy changes more carefully this time around, potentially to prevent high volatility and a miscalculation in supply.

Shekhar Ghosh is consulting editor, He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at

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