Saudi Arabia To Flood Oil Markets With An Extra 2.6 Million Bpd

Saudi Arabia plans to increase its crude oil production from below 10 million bpd currently to 12.3 million bpd next month, the company said in a filing with the Saudi stock exchange.

According to the filing, Aramco “will provide its customers with 12.3 million barrels per day (MMBD) of crude oil in April; i.e., an increase of 300 thousand barrels per day over the Company’s maximum sustained capacity (MSC) of 12 MMBD.”

Yet, according to data cited by Reuters a day earlier, the Kingdom was pumping just 9.7 million barrels daily at the moment, in over-compliance with its OPEC+ commitment that was thrown out the moment Russia refused to take part in deeper cuts.

Reuters yesterday reported, quoting unnamed sources, that Saudi Arabia had plans to boost production above 10 million bpd in April. The source said April production will be much higher than 10 million bpd, maybe close to 11 million bpd.

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Yet according to the filing quoted by the AP, “The company has agreed with its customers to provide them with such volumes starting 1 April 2020. The company expects that this will have a positive, long-term financial effect.”

This weekend, after the OPEC+ talks ended in divorce, Saudi Arabia announced it will slash its official selling prices for crude by between $6 and $8 per barrel, effective from April. The biggest discounts were offered to buyers in northwestern Europe and the United States.

Whether Saudi Arabia will boost production to 11 million bpd or 12 million bpd inside a month remains to be seen but the world is definitely heading into a deeper glut: Russia will start pumping more from April, too.

“As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier,” Energy Minister Alexander Novak said on Friday, adding “but this does not mean that each country would not monitor and analyze market developments.”

At the time of writing, Brent crude was trading at $37.63 a barrel, with WTI at $34.25 a barrel, both up by around 10 percent from yesterday’s close on the news of more economic stimulus and the decline in the number of new Covid-19 cases in China.

By Irina Slav for Oilprice.com

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