Aramco Chairman "Saudi Arabia Producing 12.3 Million Barrels"
Seems to Release Saudi Stockpiles into Market
WSJ Reports Saudi-Russia Dialogue Resumption Efforts
[Asia Economy Reporter Naju-seok] Saudi Arabia has announced plans to increase crude oil production to an all-time high. After failing to reach a production cut agreement, Saudi Arabia has abruptly declared an increase in production, signaling the start of a full-scale power struggle with Russia and others. However, since Saudi Arabia is reportedly holding behind-the-scenes talks with Russia, there remains a possibility of a dramatic resolution within April.
On the 10th (local time), Amin Nasser, CEO of Saudi state-owned oil company Aramco, stated, "We will raise daily crude oil production to 12.3 million barrels next month." This indicates a strong response to the oil price war that began after the production cut agreement collapsed.
Foreign media have suggested that considering Saudi Arabia's previous maximum crude oil production was 12 million barrels per day, Saudi Arabia might release crude oil from its reserves into the market. Until now, Saudi Arabia had been producing 9.7 million barrels per day, with the additional amount stored separately during this period.
Russia has also expressed a stance to increase production. Russia's state-owned oil company Rosneft has announced plans to increase daily crude oil production by 300,000 barrels. Russia also indicated that it might raise the increase to 500,000 barrels.
As Saudi Arabia and Russia show a direct confrontation, oil prices have been fluctuating sharply between steep declines and rapid rises. After a 20% drop on the 8th, the oil market rebounded by over 10% on the 9th. With crude oil demand drastically reduced due to the novel coronavirus (COVID-19), the market has fallen into confusion as oil-producing countries push for production increases rather than cuts.
Although Saudi Arabia and Russia are showing signs of direct confrontation, there is also speculation about the possibility of dialogue.
The Wall Street Journal (WSJ), citing Saudi government officials, reported that Khalid Al-Falih, former Saudi Energy Minister and current Investment Minister, is discussing with Alexander Novak, Russian Energy Minister, the withdrawal of the production increase plan and the restoration of consultation channels between the Organization of the Petroleum Exporting Countries (OPEC) and Russia to regulate oil supply and demand. When Saudi Arabia established the oil supply consultation channel with Russia in 2016, Minister Al-Falih led the negotiations with Russia.
Saudi officials believe that if Minister Al-Falih's negotiations succeed, official talks between OPEC member countries and Russia could be held as early as next month. Earlier, Minister Novak also left open the possibility of cooperation with OPEC. Regarding talks with OPEC member countries that could take place in May or June, he said, "The door is not closed."
Regarding this, both Saudi Arabia and Russia have refused to comment on the negotiations involving former Minister Al-Falih. Rather, Saudi Arabia's official response seems to dismiss the possibility of negotiations. Energy Minister Abdulaziz bin Salman said, "I do not think it is wise to hold a meeting in May or June that could show a failure to properly address what should have been done in this crisis situation."
The United States and others are also taking action. According to the White House, U.S. President Donald Trump held a phone call with Saudi Crown Prince Mohammed bin Salman and others to discuss global energy issues. President Trump reportedly responded, "Lower gasoline prices are good for consumers." However, considering the pressure felt if shale companies are shaken ahead of the election, it is likely that he will lean negatively toward the oil war between Saudi Arabia and Russia.
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