Saudi Arabia hasn't increased production, but they also haven't decreased production. Within OPEC, the Saudis are supposed to be the swing producer, adjusting their output up and down to maintain price targets. That arrangement has largely broken down as it relied on the other members to respect their quotas. OPEC has found (many times) that when prices drop too far, their members ignore the quotas and feud for marketshare instead.
The Saudis used to keep to their role as swing producer but this time they're letting the rest of OPEC sweat. They've got currency reserves to weather this storm but most of the other OPEC members do not (save for the rich Gulf emirates). The Saudis are trying to teach the rest of OPEC a lesson and bring them back in line.
Couple that with the phenomenal increase in American oil and gas output due to fracking and horizontal drilling and you've got a situation in which two major producers, the US and Saudi Arabia, are flooding the market. Since there's no central authority over American producers, they'll drill whenever the market price will sustain their project. America is unique in that mineral resources are privately held rather than owned by the state, giving private enterprise the incentive to drill as much as possible until the price renders a given well uneconomical.
The end result is that the Saudis have abdicated their role (not for the first time, but this may be the last) and the Americans have picked up.
America is now the world's swing producer. No one saw that coming.
The Saudis used to keep to their role as swing producer but this time they're letting the rest of OPEC sweat. They've got currency reserves to weather this storm but most of the other OPEC members do not (save for the rich Gulf emirates). The Saudis are trying to teach the rest of OPEC a lesson and bring them back in line.
Couple that with the phenomenal increase in American oil and gas output due to fracking and horizontal drilling and you've got a situation in which two major producers, the US and Saudi Arabia, are flooding the market. Since there's no central authority over American producers, they'll drill whenever the market price will sustain their project. America is unique in that mineral resources are privately held rather than owned by the state, giving private enterprise the incentive to drill as much as possible until the price renders a given well uneconomical.
The end result is that the Saudis have abdicated their role (not for the first time, but this may be the last) and the Americans have picked up.
America is now the world's swing producer. No one saw that coming.