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Saudis To The Oil Market: Get Used To Lower Prices

• http://www.businessinsider.com

Some OPEC members including Venezuela are clamoring for production cuts to push oil prices back up above $100 a barrel.

But Saudi officials have given a different message in meetings with investors and analysts: the kingdom, OPEC's largest producer, will accept oil prices below $90 per barrel, and perhaps down to $80, for as long as a year or two, according to people who have been briefed on the recent conversations.

The discussions, some in New York over the past week, offer the clearest sign yet that the kingdom is setting aside its longstanding de facto aim of holding prices at around $100 a barrel for Brent crude in favor of retaining market share in years to come.

The Saudis appear to be betting lower prices – which could strain the finances of some members of the Organization of the Petroleum Exporting Countries – will be necessary to pave the way for higher revenue in the medium term, by curbing new investment and further increases in supply from places like the U.S. shale patch or ultra-deepwater, according to the sources, who declined to be identified due to the private nature of the discussions.

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