dChan
Anonymous ID: 47023f March 7, 2020, 4:04 p.m. No.8343871   🗄️.is đź”—kun

oh what a difference 24 hours makes, not like they have a choice

 

Saudis Plan Big Oil Output Hike, Beginning All-Out Price War

 

Saudi Arabia plans to increase oil output next month, going well above 10 million barrels a day, as the kingdom responds aggressively to the collapse of its OPEC+ alliance with Russia.

 

The world’s largest oil exporter 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 U.S. to entice refiners to purchase Saudi crude at the expense of other suppliers.

 

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 people familiar with the conversations, who asked not to be named to protect commercial relations. With demand being ravaged by the coronavirus outbreak, opening the taps like that would throw oil market into chaos. In the first instance, Saudi production is likely to rise above 10 million barrels a day in April, from about 9.7 millions a day this month, according to people familiar with Saudi thinking.

 

“That’s the oil market equivalent of a declaration of war,” said a commodities hedge fund manager, asking not to be named due to the sensitivity of the situation. The shock-and-awe Saudi strategy could 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. Brent crude, the global oil benchmark, closed down 9.4% on Friday, its biggest daily drop since the global financial crisis in 2008, settling at $45.27 a barrel.

 

The production increase and deep discounts mark a dramatic escalation by Prince Abdulaziz bin Salman, the Saudi oil minister, after his Russian counterpart Alexander Novak rejected an ultimatum on Friday in Vienna at the OPEC+ meeting to join in a collective production cut. After the talks collapsed, Novak said countries were free to pump-at-will from the end of March. With jet-fuel, gasoline and diesel consumption rapidly falling due to the economic impact of the coronavirus outbreak, the energy market now faces a simultaneous supply-and-demand shock. After the failure in Vienna, Riyadh responded within hours by cutting its so-called official selling prices, offering record discounts for some of the crude it sells worldwide, according to a copy of the prices seen by Bloomberg News. Aramco has set the prices, but the official communication to clients is likely to come on Monday, a person familiar with the matter said.

 

The Saudi Energy ministry didn’t respond to a request for comment.

 

Last month, Saudi Arabia not only implemented the OPEC+ output cuts, but “voluntarily” restrained its production even further in an effort to lift prices. When the OPEC+ deal expires in three weeks, Riyadh will be able to pump as much as it wants.

 

Aramco tells refiners each month the price at which it will sell its crude, often adjusting the OSP by a few cents or as much a couple of dollars. But on Saturday, Aramco told customers it was slashing official prices by $6-$8 a barrel across all regions. The dramatic move will resonate beyond Saudi Arabia. The kingdom’s pricing decision affects about 14 million barrels a day of oil exports, as other producers in the Persian Gulf region follow its lead in setting prices for their own shipments.

https://www.bloomberg.com//news/articles/2020-03-07/saudis-plan-big-oil-output-hike-beginning-all-out-price-war