Saudi
Arabia's Minister of Energy Prince Abdulaziz bin Salman Al-Saud and Russian
Energy Minister Alexander Novak at the start of an OPEC and NON-OPEC meeting in
Vienna, Austria, December 6, 2019. (Photo by Reuters)
Source:
Press TV
Saudi
Arabia plans to increase oil output next month, well above 10mn bpd: Bloomberg
Saudi
Arabia, the world's top crude exporter, reportedly plans to increase oil output
next month to more than 10 million barrels per day (bpd) after its OPEC+
alliance with Russia collapsed, a move that would throw oil market into chaos.
The
kingdom started a price war on Saturday by slashing the prices it sells crude
into foreign markets by the most in at least 20 years, offering unprecedented
discounts in Europe, the Far East and the US to entice refiners to purchase
Saudi crude at the expense of other suppliers, Bloomberg News reported.
Speaking
on condition of anonymity, sources familiar with the conversations told
Bloomberg that Saudi oil output is likely to rise above 10 million barrels a
day in April, from about 9.7 million a day this month.
“That’s
the oil market equivalent of a declaration of war,” said a commodities hedge
fund manager who spoke on condition of anonymity.
At
the same time, Saudi Arabia has privately told some market participants it
could raise production much higher if needed, even going to a record of 12
million barrels a day, according to sources familiar with the conversations who
asked not to be identified to protect commercial relations, Bloomberg reported.
Crude
prices logged their worst day since the financial crisis after Saudi Arabia and
Russia, two of the world’s biggest oil producers, failed to agree on whether to
reduce global supply in the face of the coronavirus’s devastating effect on
demand.
Russia
rejected an ultimatum on Friday in Vienna at the OPEC+ meeting to join in a
collective production cut. After the talks collapsed, Russia indicated
countries were free to pump at will from the end of March.
The
shock-and-awe Saudi strategy may be an attempt to impose maximum pain in the
quickest possible way to Russia and other producers, in an effort to bring them
back to the negotiating table, and then quickly reverse the production surge
and start cutting output if a deal is achieved, Bloomberg said.
“Saudi
Arabia is now really going into a full price war,” Iman Nasseri, managing
director for the Middle East at oil consultant FGE, told Bloomberg.
‘Worst
meeting in OPEC history’
Iran’s
Minister of Petroleum Bijan Zangeneh said Friday’s “fruitless” meeting of the
OPEC+ was one of the group’s “worst ever”.
“This
OPEC meeting was among the worst meetings I have ever seen during the history
of this organization,” he said.
"Some
members of OPEC were insisting that non-OPEC must definitely reduce production
by a fixed amount and they did not accept that amount," Zangeneh said. “It
was a very tough meeting and was almost fruitless.”
The
Iranian minister said a reduction in the OPEC output that had been agreed upon
in December 2019 was not extended in the meeting. “The market needs production
cut and an agreement.”
The
proposal sought an additional 1.5 million barrels per day (bpd) of oil cuts
until the end of 2020 to adjust crude prices to falling international energy
demands following the global coronavirus outbreak.
The
Friday summit had also sought the extension of a 2.1 million bpd oil cut
previously agreed by the OPEC + members, meaning the proposed total of the cuts
envisaged on Friday would have been 3.6 million bpd or about 3.6% of global
supplies.
Russia,
a non-OPEC member, however, argued that it was too early to predict the impact
of the outbreak.
The
existing oil cut will expire in March, allowing OPEC+ members to pump at will
in an already oversupplied market.
News
of the OPEC summit’s failure has since sent the price of benchmark crude into a
tailspin, with oil prices down more than 6% at $47 per barrel on Friday.
-------------------------
Saudi
Arabia’s Game of Thrones
Related:
OPEC,allies seek deeper output cuts: Sources – (2019 Dec 05)
Saudi crown prince orders arrest of three top royals – (2020 Mar 07)
Saudi Arabia’s Terminal Decline – (2016 Apr 7)
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