Saudi Arabia and UAE plan for higher crude output capacity
ADNOC announced that it would also raise crude supply to more than 4 million bpd.
On 6 March 2020, crude oil prices crashed big time, as the cozy agreement between the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia and Russia broke down.
Saudi Arabia commenced a price war with its oil-producing ally Russia when it cut the official cost of crude oil to the Saudi Arabia customers by the most in more than 30 years. The price of Brent Crude (benchmarks for oil rates) has fallen from close to $52 per barrel on 6 March 2020 to $31.49 per barrel on 8 March 2020.
Saudi Arabia, the world’s top oil exporter, is striving to destroy the shale oil industry in the United States, which isn’t viable at above $50 per barrel and create some trouble for the Russian oil industry as well.
Even though Saudi Arabia’s oil production rate is low, its government’s heavy expenditure is highly reliant on high oil prices. According to the International Monetary Fund (IMF), the break-even price for the Saudi Arabian administration to be able to meet its expense in 2020 is anticipated to be at $83.6 per barrel.
It is easy to decide that the Saudis cannot afford the price war for very long. The Russians are slightly better placed, on the other hand.
With the fall of Saudi Arabia, Russia, and other planned output reductions, the Saudi Energy Ministry has ordered Saudi Aramco to boost its production ability from 12 million barrels a day (BPD) to 13 million.
UAE national oil firm ADNOC also announced it would boost crude production to more than BPD 4 million in April and accelerate efforts to expand its output ability to BPD 5 million, a goal it had previously planned to reach by 2030.
According to Russia’s Energy Minister, Alexander Novak said Saudi Arabia’s plans to boost oil production capacity were not the best option, adding Moscow had several phone calls with OPEC and non-OPEC members but that no associates had agreed to its offer.
Tanker rates rose after Saudi Arabia’s National Shipping company, tentatively chartered as many as 14 supertankers to ship crude oil to clients worldwide.
Oil's supply-demand trends also lead to a vulnerability bias, as Saudi Arabia and Russia are involved in a price war that threatens to drive world markets through over-supplied conditions, at a period when the coronavirus epidemic is eroding the global demand.
