Saudi Arabia could put a strain on Russia's budget by announcing an increase in oil production. The move would likely lead to a drop in oil prices, a key component of Russia's budget.
Saudi Arabia plans to abandon its oil price target, previously set at $100 a barrel, to prepare for increased production, the Financial Times reported.
The kingdom plans to increase production starting in December and is ready to lower oil prices.
Saudi Arabia will increase its average daily production by 83,000 barrels per month, according to the announcement. Production will increase by 1 million barrels starting in December 2025. Currently, the kingdom produces 8.9 million barrels of oil per day.
The decision comes despite OPEC+ members previously cutting production to keep prices high. Brent crude fell below $70 in early September, its lowest level since December 2021.
Saudi Arabia's increased oil production, especially when combined with falling oil prices, is likely to hurt the Russian economy.
Experts told Newsweek that Saudi Arabia's move will "put a strain" on Russia's budget as it continues its military campaign in Ukraine.
Oil and gas remain one of Russia's main sources of budget revenue, Orysia Lutsevych, head of the Ukraine Forum at Chatham House, told Newsweek.
So far, despite the EU-imposed price cap, Russia has managed to increase those revenues, which are key to funding its military campaign in Ukraine. A significant drop in oil prices would put further strain on Russia’s budget.
Saudi Arabia's announcement marks the end of an informal agreement between Riyadh and Moscow that lasted more than a year. The deal involved limiting production within the OPEC+ framework to prop up oil prices.
The deal has raised concerns in the West, with the kingdom’s heir apparent, Crown Prince Mohammed bin Salman, and Russian President Vladimir Putin closely linked to Riyadh, as well as Riyadh’s pivot to Moscow, a country that has long been a close ally of Washington.
Moscow and Riyadh have been drawn closer together by the expansion of the US in the energy market, especially in shale gas and oil production. It was this convergence of oil interests that led to the expansion of the oil alliance and the formation of OPEC+ in 2016.
Now, according to Newsweek, Saudi Arabia’s interests have won out. If Riyadh does indeed increase production, Brent crude could fall below $60 a barrel in 2025.
