Saudi Arabia continues to signal to the market that it is not backing down from the oil price war despite the crumbling oil prices amid coronavirus-hit demand and promises of huge extra supply next month.
Oil giant Saudi Aramco will proceed with the reduction of its refinery rates in Saudi Arabia in April and May in order to free up more crude oil for exports, an official at the company told Reuters on Thursday.
Saudi Arabia will continue to supply a record 12.3 million barrels per day (bpd) to the oil market in the coming months, as per order from the energy ministry, the official Saudi Press Agency reported on Wednesday.
The Kingdom is intent on unleashing growing crude oil volumes on the market, aiming to significantly boost its crude oil exports to a record-breaking more than 10 million bpd in May.
The Saudis, who launched an all-out price war for market share with Russia after Moscow refused to back deeper cuts, will not only boost April exports from the current 7 million bpd, but will also grow exports in May by another 250,000 bpd from April.
With WTI crude seeing its third-worst trading day on record, Russia is beginning to feel the squeeze as it sees its oil and gas income tumble while it has to fight for its market share in key markets such as Europe and Asia.
On Wednesday, Russian President Putin’s Press Secretary Dmitry Peskov stated that Russia would sure like to see oil prices improve, but that his country has not yet reached out to OPEC to discuss measures.
Bloomberg quoted Peskov as saying that “Of course it’s a low price, we would like to see it higher,” adding “We’re very closely monitoring the situation on global oil markets, analyzing the situation, trying to make forecasts for the near- and mid-term future,”
Moscow’s decision to not deepen output cuts triggered an unexpected response in Riyadh, which decided to leave behind the OPEC deal and start pumping flat out.
Saudi Arabia’s latest claim of supplying markets with 12.3 million bpd during the next couple of months has triggered a further collapse in oil prices on Wednesday afternoon, with WTI collapsing 25% as the Dow Jones Index shed more than 20,000 points, effectively erasing all gains since U.S. President Trump got sworn in.
Next to Russia, OPEC’s no.2 producer Iraq urged the cartel to come together and find a solution to stop the bloodbath in oil markets. According to Oilprice.com’s Irina Slav, ‘’Iraqi Oil Minister, Thamer al-Ghadhban, has asked OPEC’s head, Mohammed Barkindo to call an extraordinary meeting of OPEC+ to ‘discuss all possible ways’ to reverse the oil price slide’’.
Oil prices have plummeted to 18-year lows as the global spread of the coronavirus has throttled back air and road travel at the same time as major producers are hiking production after Russia refused to back deeper output cuts at a meeting of the Organization of the Petroleum Exporting Countries and its allies.
The sudden collapse in demand has resulted in a glut of unsold, high quality crude in Nigeria and sent prices at the U.S. Gulf Coast to a discount to benchmark futures, traders said, as Middle East producers flood the market with supplies.