Saudi Arabia said on Wednesday it plans to boost oil production capacity for the first time in more than a decade, a day after it announced a record hike in crude supply in a battle for market share that has hammered global prices this week.
Saudi Arabia’s energy ministry has directed oil producer Saudi Aramco to raise its output capacity to 13 million from 12 million barrels per day (bpd), CEO Amin Nasser said in a statement on Wednesday.
“The company is exerting its maximum efforts to implement this directive as soon as possible,” Nasser added.
No time frame was given for the plans, which would entail investing billions of dollars to increase the ability to pump more oil.
On Tuesday, Saudi Arabia said it would boost its oil supplies to a record high in April, raising the stakes in a standoff with Russia, with Riyadh effectively rebuffing Moscow’s suggestion for new talks to limit output and boost prices.
Brent crude was trading at $36.77 per barrel, down 1.2 per cent, on Wednesday.
Wednesday’s announcement could be seen as another step in an escalating price war with Moscow after the collapse of an oil supply cut pact between the Organisation of the Petroleum Exporting Countries (Opec) and Russia last week.
Much of Saudi Arabia’s international influence has derived from a role often described as the oil equivalent of a major central bank. It holds nearly all of the world’s spare capacity — an emergency reserve that allows the kingdom to step up output to cover shortfalls in other countries.
State-backed Saudi Aramco said it would increase crude oil supply in April to 12.3 million bpd, or 300,000 bpd above its maximum production capacity.
A clash of oil titans Saudi Arabia and Russia sparked a 25pc slump in crude prices on Monday, triggering panic selling on Wall Street and other stock markets already badly hit by the coronavirus outbreak.
Saudi Arabia has been pumping around 9.7 million bpd in the past few months, but has extra production capacity it can turn on. It also has hundreds of millions of barrels in store.
Moscow said Russian oil companies might boost output by up to 300,000 bpd and could increase it by as much as 500,000 bpd, sending the Russian rouble and stocks plunging.
Talks collapsed last week between members of the Opec+ alliance of Opec states, Russia and other producers, which has propped up prices since 2016. Russia rejected Opec’s call to deepen supply cuts, prompting Opec to scrap all production limits and Russia to say it would also boost output.
Shares in Aramco rebounded on Tuesday after they fell by as much as 10pc on Monday, dropping below their price in December, when the world’s biggest oil company was first listed on the Riyadh stock exchange.
On Wednesday they were trading at nearly 31 riyals per share, still below the IPO price of 32 riyals.
