Oil prices fell Thursday morning, just hours after a new report revealed Saudi Arabia, the world’s largest crude exporter, is considering increasing production later this year.
The move comes just weeks after the nation and eight other members of OPEC+ agreed to temporarily pause oil output hikes, as prices have fallen dramatically in recent weeks.
Saudi Arabia had an unofficial goal of again hitting crude oil prices of around $100 a barrel in order to balance its budget, the Financial Times reported. Now, the country is reportedly prepared to abandon the goal.
People familiar with the country’s thinking on the matter told the outlet that Saudi Arabia is committed to increasing production again on Dec. 1, following OPEC+’s two-month pause on output hikes.
The oil-producing bloc had originally planned to increase oil production to 180,000 barrels a day in October. However, this month, eight member groups agreed to cut output by 2.2 million barrels a day through November.
Officials were reportedly concerned that the pause would limit the oil bloc’s ability to increase production again. Sources told the outlet that, as a result, Saudi Arabia is committed to raising its crude output, even if it extends low prices.
The cost of oil was hit by the news Thursday at 10:30 a.m. ET, with international benchmark Brent Crude falling by around 2.8% to $71.40. U.S. benchmark West Texas Intermediate also fell roughly 3.06% to $67.56.
With prices down by nearly 6% overall this year so far, increased output from Saudi Arabia is expected to only weaken prices more, according to Reuters.
“The prospect of additional supply from Libya and Saudi Arabia has been the main driver behind the latest weakness,” Saxo Bank analyst Ole Hansen told the outlet.
While low prices have continued to cause concern among oil producers, they have alleviated some pressure on consumers amid rampant inflation. Some experts say increased output from Saudi Arabia will continue to lead to lower energy costs worldwide.
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“This, along with increasing oil production in the U.S. will lead to lower global & domestic energy costs which tends to act like a tax break by boosting disposable personal income & bolstering global & domestic economic activity,” RSM Chief Economist Joseph Brusuelas wrote in a post to X. “Means lower oil prices, falling gasoline prices and further disinflation in 2025.”
On Thursday, AAA estimated the average cost of gas at the pump for people in the United States to be $3.22, down from $3.83 one year ago. Oil and gas prices are expected to remain top of mind for voters going into the 2024 presidential election.