Saudi Arabia escalated its oil price war with Russia on Tuesday, with its state-owned company pledging to supply a record 12.3 million barrels a day next month, a massive production hike to flood the market.
The output hike — more than 25% up on February — puts Aramco supply above its maximum sustainable capacity, indicating that the kingdom is even tapping its strategic inventories to dump as much crude, as quickly as possible, onto the market. In February, Saudi Arabia produced about 9.7 million barrels a day.
It’s the latest maneuver in what’s set to be a long and bitter price war between Russia and Saudi Arabia. On Monday benchmark oil prices fell more than 20%, the largest one-day drop since the Gulf War in 1991, creating mayhem in global equity and bond markets.
Oil prices, which were recovering after the historic plunge a day earlier, inmediately gave up half of their gains. Brent crude was trading 4% higher at $35.75 a barrel at 9 a.m. in London.
Moscow responded within minutes to what looked like a war of words, with Alexander Novak, the country’s energy minister, saying Russia had the ability to boost production by 500,000 barrels a day. That would put the country’s output potentially at 11.8 million barrels a day — a record.
“Welcome to the free market,” said Bob McNally, founder of consultant Rapidan Energy Group and a former White House official. “The world is about to learn very swiftly how important a swing producer is for stability, not only for the global oil market but the broader economy and geopolitics.”
The U.S. and other Western countries are starting to worry about the oil price war between two of the world’s most powerful petroleum nations. On Monday, the U.S. Department of Energy denounced in a rare statement “attempts by state actors to manipulate and shock oil markets”.
Even as both sides ramped up production and the war of words, Novak said the door wasn’t closed to future talks. He said OPEC+ could meet in May or June.
Bloomberg