After his comments thwarted supply negotiations in Doha, oil traders are weighing another implied warning from the Saudi deputy crown prince: the threat of an intensifying clash with Iran over market share.

It was Mohammed Bin Salman’s repeated assertions that the kingdom wouldn’t join an output freeze without Iran that derailed talks between 16 producing countries on April 17. In interviews with Bloomberg News, the prince cautioned that if other producers increased output, Saudi Arabia could respond in kind. Iran is restoring exports after international sanctions over its nuclear program were lifted in January.

“It was an indication to Iranians that, look guys, if you’re not joining the table we have enough power to crank up production,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg Television interview Monday. “You can question how much more they can crank it up by, but the chances are that, now there’s no freeze, the Saudis will go ahead and increase their production as they were planning.”

Oil prices dropped on Monday after Saudi Arabia resolved that an oil-supply freeze was possible only with the support of all OPEC members, including Iran, causing talks in the Qatari capital to unravel. Tensions between the two regional antagonists have flared as they take opposite sides in bloody conflicts in Yemen and Syria.

In an interview published on April 1, Prince Mohammed said that while Saudi Arabia was ready to cap production in concert with other countries, “if there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

The world’s largest oil exporter could increase output by more than 1 million barrels a day, or about 10 percent, to 11.5 million if there was demand for it, the prince, chairman of the Supreme Council of Saudi Arabian Oil Co., said on April 14. It could increase further to 12.5 million in six to nine months, he added. The country pumped 10.2 million a day last month, according to data compiled by Bloomberg.

“This just shows how central the tensions and the rivalry in the region between Iran and Saudi Arabia are,” Dan Yergin, vice chairman at IHS Inc. said in a Bloomberg Television interview. “There’s zero trust between these two countries right now.”

Iranian Output

Iran plans to boost output to 4 million barrels a day in the Iranian year through March 2017, Oil Minister Bijan Namdar Zanganeh said April 6. That would be an increase of about 800,000 barrels a day from March production. Its crude shipments have risen by more than 600,000 barrels a day this month, according to shipping data compiled by Bloomberg.

Oil’s collapse to a 12-year low amid a global glut drew the Organization of Petroleum Exporting Countries close to its first agreement with Russia in 15 years. The slump strained OPEC-member budgets and pushed Russia into a second year of recession. Having struck a tentative accord Feb. 16, the producers tried to complete the pact over the past weekend.

Still, it’s “premature” to expect that Saudi Arabia will retaliate against Iran’s comeback, according to Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA in London.

Saudi Ability

Prince Mohammed’s comments about Saudi capacity are “a statement of their ability rather than their intent” to activate reserves, said Mike Wittner, head of oil market research at Societe Generale SA. The kingdom’s output will increase slightly anyway this summer as it meets higher local demand for air conditioning, the two banks said.

‘You’re going to get more Saudi crude seasonally in the summer and people could interpret that as countering extra supplies from other producers,” said Tchilinguirian. “But there’s no strong suggestion from Saudi Arabia that it will engage in a tit-for-tat strategy with Iran.”

Saudi Arabia’s intransigence on April 17 reaffirms that the country “is really out for market share,” said Ed Morse, head of commodities research at Citigroup Inc. The absence of an agreement will focus the market on where disrupted supply can be restored, such as in the Neutral Zone shared by the kingdom and Kuwait, he said. About 500,000 barrels a day has been halted there by a dispute between the two countries.

Downside Risk

“The potential downside risk comes from sources of supply that could be brought into the market,” Morse said in an interview.

Brent crude futures slumped as much as 7 percent on Monday before settling down 19 cents to $42.91 a barrel. The global benchmark slipped 0.4 percent further as of 12:58 p.m. Hong Kong time on Tuesday. Saudi Arabia’s decision to abandon the proposed freeze fits in with the kingdom’s long-term strategy to balance oversupplied markets by pressuring rivals with lower prices, according to Commerzbank AG.

“Saudi Arabia’s refusal to sign the agreement just proves that they would not mind if prices stay lower for longer,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail. “I would not even be surprised if they hike production further as a ‘revenge’ to Iran’s reaction. They can withstand lower oil prices longer than most of the other producers.”