While there were speculation toward changes in oil production by OPEC. OPEC announced last week that there won't be any changes in level of production. While this approach were appreciated by some (i.e. Saudi Arabia, link here), it was not satisfactory for others such as Iran.(link here).
As an economics student or a general audience who is interested in economics you may ask your self why S.Arabia didn't agree on reducing production ?! As less Supply more price. Well the story in Oil Market is not that simple !
Among OPEC countries like Iran and Venezuela who rely heavily on Oil income hoped that they can pressure OPEC to reduce the supply. However, in the other hand, S.Arabia which was enjoying the higher market share after Iran's Sanctions, didn't want to lose this market share. Interestingly enough those two countries in favor of reducing supply do not have a "good" relationship with USA or EU which may raise questions around political motivation behind OPEC decision.
Personally, I believe the incentives behind S.Arabia's decision is more political than economic. With drops in oil price S.Arabia can make sure that the economics in Russia and Iran would still have lots to deal with.
However, at near future I think S.Arabia would regret this decision and they have to change their perspective and agree to reduce the production.
Personally, I believe the incentives behind S.Arabia's decision is more political than economic. With drops in oil price S.Arabia can make sure that the economics in Russia and Iran would still have lots to deal with.
However, at near future I think S.Arabia would regret this decision and they have to change their perspective and agree to reduce the production.
