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Business & Finance

Saudi, Russia price war escalates; Aramco announces massive hike in oil output

Saudi Aramco announces to provide its customers with 12.3 million barrels per day (MMBD) of crude oil in April.
Updated 10 Mar 2020
  • Saudi Aramco announces to provide its customers with 12.3 million barrels per day (MMBD) of crude oil in April.
  • The development is likely to plunge oil prices further and it comes days after Saudi Arabia launched an all-out oil war with Russia.

Saudi Aramco has announced to supply a record 12.3 million barrels a day of crude oil next month, a move that is expected to further escalate the ongoing price war with Russia.

The oil giant in its announcement on Tuesday at the Saudi Stock Exchange called Tadawul said that it will provide its customers with 12.3 million barrels per day (MMBD) of crude oil in April; i.e., an increase of 300 thousand barrels per day over the Company’s maximum sustained capacity (MSC) of 12 MMBD.

“The Company has agreed with its customers to provide them with such volumes starting 1 April 2020. The Company expects that this will have a positive, long-term financial effect,” read the statement.

The development is likely to plunge oil prices further and it comes days after Saudi Arabia launched an all-out oil war Sunday with the biggest cut in its prices in the past 20 years after OPEC and its allies failed to clinch a deal to reduce output.

A meeting of main producers was expected to agree to deeper cuts to counter the impact of the coronavirus — but Moscow refused to tighten supply. In response, Riyadh slashed its price for April delivery by $4-$6 a barrel to Asia and $7 to the United States. It also cut its crude prices to Europe where Russia exports the most.

Russia's decision not to comply had already battered prices and there are warnings they could continue to drive lower towards $20 if the two sides do not reach an agreement.

Russia calls for an emergency meeting

The Russian Energy Ministry has called a meeting with oil companies on Wednesday to discuss future cooperation with the Organization of the Petroleum Exporting Countries, among other issues, two sources familiar with the plan told Reuters.

“We plan to discuss whether to return to (cooperation with) OPEC or not,” one of the sources said. The Energy Ministry did not immediately reply to a Reuters request for comment.