On Tuesday, Saudi Arabia ratcheted up its oil war with Russia, announcing it would raise its crude supply to a record high in April. Yahoo Finance reported, “Amin Nasser, CEO of Saudi Aramco said the oil giant would increase supply to 12.3 million barrels per day (bpd) in April for customers inside the kingdom and abroad. That’s 300,000 bpd above its maximum production capacity, indicating Aramco may also free up crude from storage.” The two countries had initiated a price war because of weak demand triggered by the impact of the coronavirus.
The 12.3 million bpd figure is a huge jump from previous months, in which the Saudis have pumped roughly 9.7 million bpd.
Russia has been trying to negotiate with the Saudis; Russian energy minister Alexander Novak indicated that Russia wanted to speak with OPEC but Saudi Arabia’s energy minister Prince Abdulaziz bin Salman told Reuters, “I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures.”
OPEC and a group of oil producers headed by Russia had been in talks, but they collapsed; Yahoo Finance noted, “Three years of cooperation among OPEC+ producers ended in acrimony on Friday after Moscow refused to support deeper production cuts to support prices hit by the coronavirus outbreak.”
WorldOil.com noted, “Russia has sought to increase production to punish American shale drillers. Russia has sought to increase production to punish American shale drillers. Saudi Arabia’s state energy company Saudi Aramco responded by offering unprecedented discounts on Saturday to customers in Asia, Europe and the U.S. Rosneft plans to pump significantly more oil next month, when the OPEC+ arrangement formally ends, and Novak said the country’s share of oil export markets will be preserved.”
OPEC reacted to the collapse of talks by eliminating limits on oil production, which triggered the downward spiral of oil prices. Saudi Arabia and Kuwait will start producing oil from the “Neutral Zone,” which would be in addition to the Saudis’ 12 million bpd.
On Monday, the Department of Energy issued a statement that read:
The Trump Administration is closely monitoring the impact of Coronavirus (COVID-19), and the fallout from last week’s OPEC+ meeting on global oil markets. These attempts by state actors to manipulate and shock oil markets reinforce the importance of the role of the United States as a reliable energy supplier to partners and allies around the world. The United States, as the world’s largest producer of oil and gas, can and will withstand this volatility.
The growth of the unconventional oil and gas industry in the United States has led to a more secure, resilient and flexible market. Thanks to President Trump’s pro-growth policies, America will remain the number one energy producer in the world. By prioritizing pro-growth reforms to tax, labor, regulation, energy, and healthcare policy the U.S. economy is more resilient than ever.