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Saudi Arabia Prepares To Flood The Market With Even More Oil

The Saudi Energy Ministry has told Aramco to increase its oil production capacity to 13 from 12 million bpd, the company’s chief executive Amin Nasser said in a statement as quoted by Reuters.

The news comes on the heels of an Aramco filing with the Saudi bourse that it would raise oil production next month to 12.3 million bpd.

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.”

However, the current capacity of the company is around 12 million bpd, suggesting it would take oil from storage to hit its April production target. If it plans to keep the pressure on for longer, it would clearly need to increase production capacity.

“The company is exerting its maximum efforts to implement this directive as soon as possible,” Nasser said in the statement.

Saudi Arabia took to arms this weekend, after Russia said it would not participate in deeper production cuts, with Energy Minister Alexander Novak adding the country’s oil companies will resume normal production from April. This could add some 300,000 bpd to current production rates or up to 500,000 bpd.

Saudi Arabia, meanwhile, has been cutting a lot more than its quota, so it has more barrels to add to global markets. These intentions also signal it was unwilling to resume talks with Russia, which the Russian side had said were not off the table despite their disagreement on deeper cuts.

Saudi Arabia is also cutting the prices of its oil. At between $6 and $8 per barrel, the cuts will be the deepest for buyers in northwestern Europe and the United States, the Saudi state company said over the weekend.

By Irina Slav for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on March 11 2020 said:
    There is a difference between production and production capacity. Production is what an oil-producing country can produce immediately while spare capacity is defined as the volume of production that can be brought on within 30 days and sustained for at least 90 days.

    The claim that Saudi Arabia has a production capacity of 12.5 million barrels a day (mbd) is questionable and furthermore it has never been tested. Saudi Arabia can produce some 8.0-9.0 mbd with another 700,000 barrels a day (b/d) to 1.0 mbd coming from storage. Moreover, it normally takes years and billions of dollars to expand production capacity by 1.0 mbd particularly when the expansion is coming from five giant oilfields more than 70 years old.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Roy Orbisson on March 20 2020 said:
    Definitely, I believe I can see the light, and see which country is going to collapse first. O, MBS you are real tiger!

Leave a comment




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