Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Saudi Arabia, Russia raise stakes in oil production standoff

CommoditiesMar 10, 2020 02:34PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Saudi Aramco logo is pictured at the oil facility in Khurais

By Rania El Gamal and Olesya Astakhova

DUBAI/MOSCOW (Reuters) - Saudi Arabia said on Tuesday it would boost its oil supplies to a record high in April, raising the stakes in a standoff with Russia and effectively rebuffing Moscow's suggestion for new talks.

The clash of oil titans Saudi Arabia and Russia sparked a 25% slump in crude prices on Monday, triggering panic selling on Wall Street and other equity markets that have already been badly hit by the impact of the coronavirus outbreak.

Oil prices (LCOc1) recovered some ground on Tuesday, but were still 40% down on the start of the year.

U.S. President Donald Trump spoke with Saudi Crown Prince Mohammed bin Salman in a call on Monday to discuss global energy markets, the White House said on Tuesday.

Trump is seeking re-election this year and will benefit from lower gasoline prices at the pump. But the U.S. government will also be concerned by the potential for bankruptcies in the U.S. shale industry, which plays an increasingly important economic role.

Several U.S. oil firms said on Tuesday they would cut spending and dividends.

Amin Nasser, chief executive of Saudi Aramco (SE:2222) said the state-run oil giant would increase supply in April to 12.3 million barrels per day (bpd), or 300,000 bpd above its maximum production capacity, indicating it may draw from storage.

Saudi Arabia has been pumping around 9.7 million bpd in the past few months, but has extra production capacity it can turn on and it has hundreds of millions of barrels of crude 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.

U.S. Treasury Secretary Steven Mnuchin told Russia that energy markets needed to stay "orderly".

Brent oil prices jumped 8% on Tuesday to above $37 per barrel after Russian Energy Minister Alexander Novak said Moscow was ready to discuss new measures with OPEC. [O/R]

Russia's Energy Ministry also called for a meeting with Russian oil firms on Wednesday to discuss future cooperation with OPEC, two sources told Reuters.

But Saudi Energy Minister Prince Abdulaziz bin Salman appeared to rebuff the suggestion.

"I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures," he told Reuters.

STRAINED BUDGETS

Riyadh's unprecedented hike in supply follows the collapse of talks last week between members of the OPEC+ grouping, an informal alliance of OPEC states, Russia and other producers that has propped up prices since 2016.

Russia rejected OPEC's call to deepen existing supply cuts, prompting OPEC to scrap all production limits and Russia to say it would also boost output, sending crude prices briefly down to almost $31 and reviving fears of a 2014-style price crash.

Saudi Arabia needs an oil price of around $80 to balance its budget, but has cash reserves and the ability to borrow to deal with a price plunge for now. Russia needs about $42 to balance its books and also has hefty cash reserves it can draw on.

Iraq and some other OPEC nations, with more meager financial resources to cope with a dramatic drop in oil revenues, called for action to shore up prices.

Ratings agency Fitch said a sustained sharp drop in oil prices would hit the sovereign ratings of those exporting countries with weaker finances, particularly those with exchange rates pegged to the dollar.

But even Saudi Arabia, with its hefty financial reserves and sovereign wealth fund, did not have "infinite leeway" to support its A (stable) rating, Fitch analyst Jan Friederich said.

Aramco shares, which slid at the start of the week, were up 9.9% at 31.15 riyals at 1353 GMT on Tuesday but were still below their December listing price of 32 riyals.

Shares in U.S. firms which had also dropped recovered slightly on Tuesday. Occidental Petroleum (N:OXY) said it would cut dividend and spending, while Chevron (N:CVX) said it might cut spending and production.

The U.S. Department of Energy said on Tuesday it had suspended a sale of up to 12 million barrels of oil from the government's emergency crude reserve due to the price drop.

OPEC+ had effectively been cutting output by 2.1 million bpd, including the extra voluntary cuts by Saudi Arabia.

OPEC had sought further cuts that would have brought the total to about 3.6 million bpd or roughly 3.6% of global supplies, but Moscow's rejection of that plan led to the collapse of the whole deal.

Saudi Arabia, Russia raise stakes in oil production standoff
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
The Covenant
The Covenant Mar 10, 2020 1:12PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Finally the oil cartel is gone and people pay low price for oil as in a liberal economy where no price agreement happen. NEVERTHELESS OIL will be useless for public transportation. Lithium not.
TeaMaker Tex
TeaMaker Tex Mar 10, 2020 9:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This is nothing compared to the 80 s. It will be a short problem for the independent oil folks. They can reach oil in west texas with post hole diggers.
Michael Galassini
RoyHobbs Mar 10, 2020 9:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Many “post hole diggers” were already on life support at $50, if we stay at $35 there will be a whole lot of bankruptcies in 2020.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email