Even though oil prices continue to languish at around $55pb, there is still no sign that Saudi Arabia will give in to pressure from other OPEC members to cut oil output. Oil Minister, Ali al-Naimi, has been resolute in his assertion that the Kingdom will not unilaterally scale back production in order to shore up prices out of concern that it will simply benefit higher cost producers. The crucial point here is that Saudi Arabia is in a much stronger position to absorb the hit to its income than other oil producers and so it can afford to take a longer-term view of the market. Admittedly, at current oil prices, Saudi Arabia’s budget and current account positions are almost certainly in deficit. But the Kingdom has already started to draw upon its vast foreign exchange reserves to sustain spending.
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