Saudi Arabia’s US$3 billion ($4 billion) insurance premium to protect against falling oil prices will end up being a lot smaller than it seems at first sight. That holds even if demand turns out to be stronger than the kingdom seems to fear.

This week’s Opec+ meeting of oil producers broke up in disarray on night of Jan 4, with Russia pressing for output targets to be raised by 500,000 barrels a day in February. Most other members wanted to leave them unchanged as the coronavirus continues to roil global economies and the recovery in demand remains fragile.

Saudi Arabia appeared particularly worried. In his opening remarks, the country’s oil minister warned repeatedly against squandering gains made by the group’s hard-won sacrifices last year for “an immediate, but illusory, benefit.” He went so far as to suggest it was even necessary to reverse the output increase that had just come into effect.

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