Is Saudi Arabia gearing up for another oil price war?

US West Texas Crude oil price tumbled 4% after reports about Saudi Arabia being prepared to tolerate current low oil prices, and could even announce production hikes next week.

On Wednesday, Reuters was told by five unnamed sources that the Saudis don’t intend to bolster the market with more supply cuts, as Riyadh’s advantage of being able to tolerate low prices is sustainable.

In fact, reports indicate the Saudis might even try to expand their market share after sacrificing for OPEC+ voluntary production cuts for too long.

Earlier this month, OPEC+ announced plans to accelerate the cartel’s plan to gradually remove voluntary production cuts through an aggressive output hike in May, amounting to 411 thousand bpd.

It also seems that the Saudi are trying to appease the Trump administration, which called on OPEC to intervene and reduce fuel prices through increasing production.

IMF’s Position

The International Monetary Fund expects recent gains in non-oil sectors in the Gulf region to compensate for the impact of lower prices.

In its latest report, the IMF expects the Gulf Cooperation Council’s countries to grow by 3% in 2025, and by 4.1% in 2026.

In order to stabilize the markets, OPEC+ has cut its total output by nearly 5.85 million bpd, or 5.7% of total global supplies, since 2022.

In March however, the organization went ahead with decisions to start hiking production from April and abandon the drive to reduce supplies.

Regional Outlook

The IMF expects the Middle East and North Africa region to grow by 2.6% in 2025, and 3.4% in 2026.

It’s a marked reduction from previous forecasts of a 4% growth rate in 2025, and 4.2% in 2026.

The IMF expects Saudi Arabia’s GDP to grow by 3% this year, and 3.7% next year, which is higher than its neighbors. 

Bahrain is expected to grow by 2.8% in 2025, with Qatar estimated at 2.4% this year, and Oman at 2.3%.

In another sign of brisk growth, the S&P ratings company raised Saudi Arabia’s credit rating from A to A+ with a stable outlook.

The fastest growing economy in the region is expected to be the UAE at 4% this year and 5% in 2026.

Facing Challenges

In its report, the IMF identified different challenges that could impact growth negatively, including trade tensions, geopolitical struggles, and climate shocks. 

Geopolitical tensions could disrupt trade, tourism, supply lines, and increase refugee dispersions in the region.

The IMF noted that the Middle East and North Africa remain highly exposed to extreme weather conditions, including drought and floods, which could impact growth.