Oil price fear: Saudi Arabia is planning massive support-Russia's economy is waning

Oil price fear: Saudi Arabia is planning massive support-Russia's economy is waning

Saudi Arabia plans to increase its oil production, which could have a significant impact on global oil prices and in particular on the Russian economy. This strategic project has already attracted the attention of market analysts and experts because it is closely linked to political and economic interests.

The dependence on Russia on revenue from oil sales is enormous. Oil and gas revenues are essential for the financing of government spending and military activities. An increase in oil production in Saudi Arabia could reduce oil prices, which would be problematic for Russia in the current geopolitical situation. The kingdom thus sets a counterpoint for a previous Opec+decision to reduce the promotion to stabilize prices.

expected price reduction by Saudi Arabia's measures

As the Financial Times reports, this procedure could mean Saudi Arabia that the country is ready to drop the desired price of $ 100 per barrel. The market forecasts show that from December 2024 an increase in oil production of around 180,000 barrels should come into force per day. Such a measure could mean that the Russians continue to be under pressure to reduce their prices in the global market.

The current price situation is already worrying for Russia. The price of Brent Crude fell to less than $ 70, 2024 on September 26, 2024, which has been the lowest level since December 2021. This development is further reinforced by Saudi Arabia's plans, which could turn out to be a decisive factor for the market.

Oil prices have an immediate impact on Russia's economy. According to the Observatory of Economic Complexity, around 27.3 percent of Russian exports are eliminated to unaffected crude oil, while sophisticated oil makes up another 14 percent. The main trading players in the oil industry are essentially China, India and some EU member states that continue to maintain oil-based shops with Russia despite the geopolitical tensions.

European sanctions and their effects

In order to weaken the Russian economy, the western countries implement targeted economic sanctions. An essential part of this strategy is the introduction of a price lid for Russian oil, which is currently set at a maximum of $ 60 per barrel. This is intended to further reduce the Russian income and put a strain on President Vladimir Putin's war treasury. EU Commission President Ursula von der Leyen emphasized the importance of this step and the associated global advantages.

The pressure is reinforced by maintaining a flexible handling of the price lid, which means that future adjustments can be made to exert additional pressure on Russia. The strategy is clear: the western countries intend to reduce financial currents to Russia in order to compromise the country's military activities in Ukraine and thus to promote a victory for Ukraine.

Analysts now expect a possible price war in the oil sector. Tamas Varga, a leading analyst, determined that the plans of Saudi Arabia may not only lead to a market tension, but could also complicate the situation for the Opec. If the prices fall to $ 40 per barrel, this would be closer to the price lid defined by the G7 and thus get new challenges for the Russian economy.

The decline in oil revenue already has a noticeable consequences for Russia: According to the Center for Research on Energy and Clean Air, the export income of Russia was over 664 million euros per day last year. Waste of these income could result in deeper economic problems. If Saudi Arabia can continue to put pressure on oil prices with its increase in the offer, the necessary income to maintain Russia's military spending may no longer be secured.

For detailed information on the effects of the increased oil production of Saudi Arabia and its possible consequences for the global economy, see the current reporting on www.merkur.de .