Saudi Arabia’s Oil Market is in a desperate position

As the US-Saudi oil spat intensifies, what are Biden’s options?

Sitting on the ground in Al-Qatif, a town in southern Saudi Arabia, I witnessed a small but significant demonstration of dissent. The Saudi royal family is in a desperate position, and its oil fortunes are at stake. The demonstrators were protesting the seizure of Al-Qatif’s main street by riot police, who, on Monday, arrested 17 activists, including a number of Saudi students from the King Fahd University of Petroleum and Minerals. The demonstration began with a peaceful march and ended with a riot in which protesters clashed with the police and set fire to a car. It was the second time in as many weeks that protesters have gathered in the city—after an earlier demonstration and a protest the day before on Monday.

In the last two weeks, the oil market has deteriorated so badly that more than US$10bn has been erased from prices. On Monday, another oil shock came when Saudi Arabia agreed to sell crude to some of its peers. The country agreed to sell up to US$10bn of crude to Russia, with the first shipment scheduled for next month. More oil would be sold to Iran, and to other global players, including Canada.

“It is hard to overstate the strategic importance of Saudi Arabia and Saudi supply to the global market for any one of the major markets,” said Daniel Yergin, author of the new book The Quest: Energy, Intelligence and the Future of War. “This is the one aspect of the global economy where the US is alone in having the clout to influence Saudi behaviour.”

The question of just who is responsible for the Saudis’ decisions has become critical as the kingdom faces one of the most serious crises of its modern history. Over the last 20 years, the kingdom has built a series of strategic alliances in the global oil market, some of which depend on

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