After Saudi Arabia's sudden insistence that Iran be part of a meeting in Doha last weekend to discuss an oil production freeze, global market analysts are scratching their heads over what the oil-rich kingdom's next move could be.
Oil analysts and market watchers have noted with interest this week that Saudi Arabia's policy when it becomes to oil has become a lot less predictable than it seemed in late 2014. Back then, the de-facto leader of oil-producing cartel OPEC refused to cut production in order to retain market share in the face of rival producers, notably in the U.S.
Eighteen months later and its strategy has appeared to pay off, with data showing that shale oil producers are closing down rigs every week and oil output is dropping. Although its own strategy has damaged the government revenues of all 13 countries within the OPEC family, which tends to rely on oil exports for the majority of its wealth, it has enabled the so-called cartel to retain its market share of just under 40 percent.
What's Iran got to do with it?
There appears to be trouble brewing closer to home for the group, however with a meeting of highly-anticipated meeting of OPEC and non-OPEC producers in Qatar last weekend, at which it was hoped a production freeze could be agreed, failing due to growing friction between Saudi Arabia and fellow OPEC member Iran.
The Islamic Republic did not attend the meeting and had consistently said it is not willing to freeze production as it wants to restart its oil industry and economy after years of economic sanctions.
Oil prices fell following the meeting and Saudi Arabia was quick to lay the blame at Iran's door but the country knew about Iran's unwillingness to cut and so analysts are now questioning just how much Saudi's regional rivalry with Iran is driving its latest strategy over oil.
"I agree with the near-consensus among the commentariat that Riyadh's seemingly sudden decision not to support a freeze was clearly motivated by other factors," Alastair Newton, head of Alavan Business Advisory and former political analyst at Nomura, said in a note on Thursday. "And that by far the most likely of these was the ongoing decline in cross-Gulf relations with Iran."
Newton said that Mohammed bin Salman -- Saudi's deputy crown prince who is increasingly influential over oil policy – could have decided to freeze production in order to help the Saudi economy but that, Newton argued, this had taken "second place relative to looking to constrain Iran's regional aspirations by squeezing it economically."
"Against this backdrop, I have to agree with the Financial Times that Saudi policy on oil has suddenly become far less predictable."