Any idea that Saudi Arabia was about to abandon its effort to turn the oil market on its head was dashed earlier this month when the country's top energy official said it would do something few other industry players want to do right now: Invest.
The oil price collapse over the past 16 months has forced the world's biggest energy companies to cut hundreds of billions of dollars in future spending to bolster their balance sheets. But Ali al-Naimi — oil minister and architect of the Saudi strategy to maintain output and keep prices low to hobble its rivals — voiced a commitment to press on with investments in exploration, production and refining.
It reinforced the idea that however much Riyadh's revenues have been shrunk — by an oil price that has more than halved — the kingdom has a higher pain threshold than everybody else. And it will press ahead with its long-term plan to undermine rivals and secure its market share
"No one in Saudi thinks lower oil prices are good," says one Riyadh-based western diplomat. "But it is the reality. They have to weather through it and hope this strategy plays out. There is a great deal of uncertainty."
Supplies from high-cost producers — ranging from US shale to Brazil's deepwater fields — swelled in a world of $100 a barrel oil and led to a shift in the market forcing a response from the kingdom which felt it had been pushed into a corner. The November 2014 Saudi-led decision by Opec ministers to maintain, rather than cut, output marked a significant departure from the cartel's traditional policy of reducing supply to stabilise price drops and upended an energy order in place for decades.
The push to focus on its own market share, rather than higher oil prices, is showing some signs of success. But it is also considered a perilous gambit that could last years, affecting the kingdom's economy far more than anticipated.
"It is working," says Bob McNally, a consultant at Rapidan Group which advises on the energy market. "But it is going to be longer and costlier than the Saudis expected. They're stuck in this seemingly endless trench warfare and have a bigger fight than expected."
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Industry observers say they were acting too late but that in the absence of support from other major producers to cut output, Saudi Arabia had no choice. Leonardo Maugeri, a former executive at ENI, the Italian energy group, who this summer briefed Saudi officials on oil market dynamics says they do not consider what they have done to be a gamble.
"This was the only possible strategy they had," he says. "Saudi Arabia is hoping sooner or later that the strategy will work, but they are having to go through a lot of pain to find out."
Investment cuts and project deferrals will have a grave impact on high-cost production outside of Opec countries in the coming year, energy forecasters predict. That should translate into greater demand for crude from the cartel's producers.
Saudi Arabia has so-far shown itself to be resilient: retaining its share of imports to Asian markets amid increased competition from rivals such as Iran and Iraq. Lower crude prices have also boosted demand for refined products from the US and Europe.
But Saudi Arabia is only at the beginning of what could be a long-drawn out process. The effort to rid the world of 2 million barrels a day in excess supply could take several years. Even if prices bounce back to previous highs — as spending cuts reduce production too much — expensive oil output could surge again. Although Saudi officials hope flexible US shale production will prevent this, it is still uncertain.
As the experiment plays out, the kingdom is burning through its reserves to maintain social spending. The country has turned to the debt markets while renewed speculation against the Saudi riyal and a yo-yoing stock market have amplified anxieties about King Salman's economy. War in Yemen, China's economic slowdown and Iran's re-emergence have also raised the political and economic stakes.
"Ali al-Naimi said he was ready to see prices go down to $20. They [The Saudis] don't care about others," says Ali Assaoui, a Riyadh based analyst. "The Saudis are the masters of the long game. Remember if they are suffering, others are suffering more"
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The impact of the Saudi Arabia-led decision to forgo high oil prices and short-term revenues for long-term market share has been felt all around the world: from Aberdeen and Alberta to Stavanger and Houston.
It was in the Texas oil town at the start of the year, as oil prices stood at levels last seen during the financial crisis, that Gallery Furniture owner Jim "Mattress Mack" McIngvale launched an offer to give away furniture should US benchmark crude top $85 a barrel at the end of 2015. Those initially convinced by the offer to "give you back 100 per cent of your purchase amount" are now doubtful. "A lot of people immediately piled in believing that prices would inevitably rise. [But] who in their right mind is going to fall for that now?" says an oil analyst in Houston.
It turns out that Saudi Arabia was not bluffing about its pledge to see off the threat of US shale oil among other high-cost producers, she says.