Saudi Arabia is losing its iron grip on global oil markets

The kingdom is struggling to execute its plan to keep prices elevated. Higher prices would help pay for Saudi’s infrastructure-spending spree, including $1 trillion of projects designed to rapidly pivot the economy away from oil.

But the cartel’s increasingly fractious members are pushing to pump more and maintain their market share against the expectation of growing competition from U.S. shale drillers emboldened by former President Donald Trump’s re-election.

“We have more liquid gold than any country in the world," Trump said in his victory speech on Nov. 6. “More than Saudi Arabia. We have more than Russia."

Ahead of Thursday’s scheduled meeting of OPEC+, the Saudi-led cartel and a Russia-aligned producers’ group, that creates a dilemma for its de facto leadership in Riyadh: continue defending the price of oil, or fight to take back market share.

It appears the Saudis aren’t inclined to start another price war.

Saudi officials say the kingdom is likely to keep the spigots tight on its own production, further pushing back plans to loosen them that were already delayed twice.

“They won’t be able to bring oil back online next year," said a Saudi official.

Yet another major producer, the United Arab Emirates, has been allowed to add more barrels into the market from January. And Iraq and Kazakhstan are also lobbying the cartel to bring more production of their own, which would boost supplies further and likely depress prices.

The Saudis tried to fight U.S. shale by waging a price war in 2014 and 2020 but ultimately failed to rein in mounting American production.

This time around, the kingdom’s officials are wary of making a bold move before Trump signals where he would like prices to be, they said. While the president-elect has previously said he wanted to ease pain at the pump for consumers, his campaign was funded by oilmen who also benefit from higher prices.

Crude output in the Americas has already helped slash the OPEC+ slice of global supplies to some of its lowest levels since the broader group’s 2016 founding.

OPEC+ production cuts, pushed by Saudi Arabia, have made that even more uncomfortable for other members.

“It’s really easy to be part of a cartel when a market is growing," said Jorge León, a Rystad Energy analyst who formerly worked for OPEC. “Nobody wants to be in a cartel where they are cutting production."

The upshot is that OPEC+ has lost some of its geopolitical heft in Washington. U.S. Assistant Secretary of State for Energy Resources Geoffrey Pyatt said the cartel’s market power these days is “less than you would imagine" as oil producers elsewhere—Brazil, Canada and Guyana—pump gushers of crude.

“In the world that I live in, the challenge as we think about strategy is, how does the United States think about its status as an energy superpower?" he said. “We don’t have to be so fussed about what OPEC or anybody else is doing, because we can focus on our own story."

OPEC watchers say the shift in power has undermined Saudi Arabia’s ability to corral the cartel’s members or attract new entrants. Projections that oil demand will peak in the coming decade are pushing many producers to try to maximize profits as quickly as possible.

That tension spilled into public view last week, when an Iranian OPEC+ delegate published a commentary on the state-run news agency arguing that the cartel’s Saudi-led policy to keep prices elevated has largely been a failure, in part because it motivated the U.S. and other producers to pump more. The delegate noted that Angola already quit the cartel, and speculated that other countries could soon follow as a result of the policy.

The situation marks a U-turn from just two years ago, when oil traded for more than $100 a barrel, President Biden pleaded with the Saudis to open the spigots, and some Wall Street investors projected a long run-up in prices similar to the China-driven commodity boom of the 2000s.

Now, with global prices wavering below $75 a barrel, OPEC+ is staring down a Chinese economy that is growing more slowly than expected and becoming increasingly fuel efficient. Instead of pumping more oil starting in January, as previously planned, it “may be wiser to wait for the end of the first quarter and higher Chinese demand to hike output," an OPEC delegate said.

The cartel’s internal analysts, overseen by a Saudi official, have trimmed their estimated demand growth this year and next for four consecutive months. Those dimming expectations have contributed to the group’s loss of credibility—among traders, U.S. officials and even some delegates—to accurately forecast the market.

The International Energy Agency estimates global supplies will outstrip demand by more than one million barrels a day next year if the group doesn’t cut output.

“The industry is overinvesting," Torbjörn Törnqvist, chairman of Gunvor Group, one of the world’s largest trading houses, told reporters on the sidelines of an Abu Dhabi oil conference. “There is a surplus [of oil] building up now."

Those factors have pushed Wall Street in recent months to bet on weak prices ahead, contributing in September to hedge funds’ first net-bearish positioning on Brent crude futures on record.

Some in OPEC+ worry that Trump’s pledge to “drill, baby, drill" through looser regulation and expedited leasing of federal lands could add to the downward pressure on prices. At the same time, U.S. oil executives and analysts are wary of quickly increasing production the way Trump has promised.

Federal officials project U.S. production will average 13.2 million barrels a day this year—47% higher than Saudi’s October output—growing to 13.5 million barrels a day in 2025. One county in New Mexico alone now pumps more crude than the smallest six of OPEC’s core 12 members.

Saudi oil minister Abdulaziz bin Salman has at times appeared openly frustrated at the kingdom’s waning influence.

Under his watch, OPEC meetings were often canceled or conveyed at the last minute, and often online to avoid leaks. In September, he warned prices could drop to as low as $50 per barrel if so-called cheaters within OPEC+ didn’t stick to agreed-upon production limits, The Wall Street Journal previously reported.

For some analysts, the strategy for Saudi to continue defending the oil price amounts to a long-term gamble on waiting out U.S. shale’s projected peak in the coming years.

Meanwhile, keeping OPEC+ together will be crucial “to sustain themselves through what could be a low-price period," said Karen Young, a senior research scholar at the Columbia University Center on Global Energy Policy.

Write to Summer Said at summer.said@wsj.com, David Uberti at david.uberti@wsj.com and Benoit Faucon at benoit.faucon@wsj.com