On Wednesday, OPEC+, the oil cartel led by Saudi Arabia and Russia, agreed to slash production by 2 million barrels per day, twice as much as analysts had predicted, in the biggest cut since the Covid-19 pandemic.
“Saudi Arabia is looking to head off a repeat of 2008 when the market crash sent the global economy into a recession and oil prices suddenly plummeted, requiring emergency action by OPEC,” said Wald.
Analysts also say Saudi Arabia cannot afford to let oil prices go below a certain level for budgetary reasons.
For its budget to break even, global oil prices must be at around $79 a barrel, according to the International Monetary Fund.
That was a warning sign for Saudi Arabia and other oil exporters, who depend on oil for a majority of their revenue.