Insight - Saudi Arabia’s output cuts will protect its riches

The conventional dilemma goes like this: If Saudi Arabia pumps more crude it will increase market share. The increased supply, though, may weigh so heavily on prices that revenue ends up falling instead. On the other hand, reducing production and market share may paradoxically increase revenue, as inflexible demand pushes up the per-barrel price.(File pic shows Saudi Aramco's oil production).

SAUDI Arabia’s decision last week to deliver a surprise cut of one million barrels a day in its crude production shocked the oil market.In abandoning a policy of collective responsibility and letting other members of the Opec+ grouping increase output while reducing its own, the kingdom took the entire burden of balancing supply and demand on its shoulders.

While choking off its own oil wells, Saudi Arabia is offering frenemies like Russia (and enemies like Iran) a chance to boost their market share on its own dime.