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Are Saudi Arabia and Iran Ready to Work Together?

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With no apparent end in sight to the stagnant oil market, Saudi Arabia has been forced to make what’s undoubtedly a distasteful gesture in an effort to boost oil prices. That action involves making the effort to cut its production of the commodity if its Middle East rival, Iran, also follows suit.

This decision is the culmination of six months of back-and-forth debates between the two countries, which began with Iran rejecting the first proposal back in April. This most recent offer came within the past month, though Iran hasn’t yet made a final decision.

For most of the past two years, the Saudis have been vigorously fighting any attempt by its fellow OPEC partners to cut production. That strategy was an attempt to shake out rivals in other industries, specifically the shale natural gas market in the United States.

The Kingdom was able to undertake this approach due to the vast resources it’s built up since oil became an economic cudgel. However, no such changes took place and the coffers in Riyadh continued to dwindle, which led to tighter economic controls.

Earlier in 2016, the Saudis had been producing approximately 10.2 million barrels of oil per day. That changed once demand increased during the summer months, with the Kingdom boosting that amount to 10.6 million.

Iran, on the other hand, has been producing 3.6 million barrels per day and had previously indicated that they wouldn’t cut production. Their reasons were based on efforts to get back to their previous market share, which had been reduced after the imposition of sanctions. In addition, they sought to get back to their previous level of four million barrels.

In this case, the adage that politics makes strange bedfellows apparently has been extended to include the field of economics.

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