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What really happens if Saudi Arabia starts pumping more oil

A month ago, I wrote about "why OPEC will never cut production again." This weekend we saw Saudi Arabia put an exclamation point on the matter by scuttling a deal in Doha for an oil production freeze. The repurcussions of this decision will obviously be far reaching.

Stating that "if we don't freeze, then we will sell at any opportunity we get," Saudi Prince Mohammed bin Salman made it clear going into the meeting that Saudia Arabia would not let up on production unless Iran agreed to a freeze, too. Given that Iran said they would not even attend the meeting, the outcome was not surprising at all, except to most oil analysts (see my ranking compared to theirs on TipRanks).

The Saudi Prince went on to say that Saudi Arabia could pump 11.5 million barrels per day (bpd) anytime, up from the current 10.4 million bpd. He also said it would only take about six months to ramp up to 12.5 million bpd if they were so inclined. We should expect to see those increases in production and capacity sometime soon. With more Red Sea development looming, it would not be surprising to see Saudi Arabia ramp up capacity even more if demand supports it.

The Prince's words are not idle thoughts. There is a purpose behind every syllable. The higher-cost oil producers, and their financiers, must completely understand that Saudi Arabia sees driving them out as in the Kingdom's best long-term interest.

While a lot of breath and keystrokes have been expended on...