The 'Key Concern' For Global Oil: Saudi Arabia

• Saudi Arabia's agenda remains the "key concern" for global oil, according to analysts at Imperial Capital.
• Saudi Arabia is "fighting for its very existence" against Iran with the "only real weapon it has" – oil.
• The United States–Iran nuclear deal is "highly disturbing" to Saudi Arabia.

In a report published Monday, Imperial Capital's Oil Strategy analyst Bob Christensen argued that Saudi Arabia's agenda remains the "key concern" for the global oil market and the country is unlikely to retract all of its summer power burn crude oil from the global market.

According to Christensen, Saudi Arabia is expected to divert its summer power burn crude oil to the global oil market this fall as part of its strategy of maintaining market share growth while simultaneously "harming" Iran's treasury. As such, the analyst is expecting anywhere from 300,000 to 400,000 barrels per day could be "left on the world oil market that the market does not need."

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Christensen said Saudi Arabia is "fighting for its very existence" against Iran whose oil sales are set to be introduced to global markets as part of the "deal" the country made with the United States and other countries. In fact, the analyst argued that the U.S.–Iran agreement is "highly disturbing" to Saudi Arabia as it may suggest a shift in U.S. policy towards Iran and away from the Arab world.

With that said, Saudi Arabia is fighting back with the "only real weapon it has " – crude oil and excess capacity to produce as every barrel of oil Saudi Arabia sells results in one less barrel Iran sells. The analyst further suggested that Saudi Arabia could produce "excessive" amounts of oil for at least two years and reach 12-12.5 million barrels per day, versus its current production of around 10.7 million barrels per day.

"We continue to see the principal risk to world oil prices being Saudi Arabia's agenda for greater market share and lower prices to hurt its geopolitical foe, Iran," Christensen concluded. "So far, we see no signs of abatement in Saudi Arabia's agenda."