- Russia and Saudi Arabia are prepping for a lengthy oil-price war after OPEC+ negotiations fell through and sparked an all-out sprint for market share.
- Saudi Arabia escalated the conflict on Tuesday, boosting production plans to a record 12.3 million barrels per day starting April 1.
- Russia fired back within minutes by hiking its planned output by 500,000 barrels per day, Bloomberg first reported.
- Initial strikes over the weekend pushed oil’s price down the most since 1991 on Monday, but optimistic sentiment from Moscow could be driving a mild recovery in Tuesday’s session.
- Russia’s energy minister said the nation is still open to OPEC+ cooperation down the road. The coalition has meetings scheduled for May or June.
- Watch oil trade live here.
Russia and Saudi Arabia are strapping in for a prolonged oil-price conflict, though a peace deal isn’t yet out of the cards.
Both nations on Tuesday hiked warnings of dropping prices and flooding the oil market with inventory. The announcements arrive after oil prices slumped the most since 1991 on Monday. The commodity has since recovered some losses in Tuesday trading but remains well off its early-2020 levels as the global market braces for long-term volatility.
Saudi Arabia escalated its bout on Tuesday, saying state-owned Saudi Aramco could push its total output to a record 12.3 million barrels per day starting April 1. The supply jump is more than 25% higher than the 9.7 million barrels per day produced in February and forces Aramco to empty its sizable inventories while operating at maximum capacity.
Russia fired back in a matter of minutes, threatening to raise output by 500,000 barrels per day in the near future, Bloomberg first reported. The country can begin output increases as soon as April 1, when the current OPEC deal expires. While Russian oil firms can hike production by about 200,000 to 300,000 barrels per day in the short-term, the 500,000 barrels per day jump is achievable down the road, Energy Minister Alexander Novak said.
Russia currently produces about 11.3 million barrels per day, while Saudi Arabia puts out roughly 9.7 barrels per day. Though Russia’s output hikes would yield record-high production levels, they still fall under Saudi Arabia’s April plans.
The conflict kicked off last week when OPEC sought to cut production among member nations and support oil prices. The coronavirus outbreak had eaten away at demand for the commodity, and the historically cooperative group looked to ink a new deal on Friday. Yet Russia refused to join the Saudi Arabia-led coalition, driving a Friday sell-off that cut prices by 11%.
Saudi Arabia responded Saturday by slashing its official selling price the most in about 20 years. The tit-for-tat sparked a global price war as the two biggest exporters rushed to dominate the commodity market. The fresh volatility drove Brent crude down more than 20% on Monday and contributed to the US stock market’s biggest one-day rout since the financial crisis.
Moscow hinted on Tuesday that future cooperation with OPEC+ is still on the table. The country is open to further talks at OPEC+ meetings scheduled for May or June, Novak said.
“I want to say that the door isn’t closed,” Energy Minister Alexander Novak said on the state-operated Rossiya 24 TV channel, according to Bloomberg. “If needed, we have various tools, including reducing and increasing production, and new agreements can be reached.”
The optimistic sentiment and an oversold bounce likely drove the commodity’s recovery after Tuesday’s open. Brent crude, the international benchmark for oil pricing, traded at $US37.60 per barrel as of 9 a.m. ET Tuesday, up about 12.5% from its previous close.
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