Aramco to increase oil output to 12.3m barrels per day starting April

Aramco to increase oil output to 12.3m barrels per day starting April
Gulf stock markets rebounded strongly in opening trade Tuesday, led by Saudi Tadawul as oil prices bounced after heavy losses.(File/AFP)
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Updated 11 March 2020

Aramco to increase oil output to 12.3m barrels per day starting April

Aramco to increase oil output to 12.3m barrels per day starting April
  • Increase in production level would be 300,000 barrels per day
  • Trading of Aramco shares earlier suspended upon the oil company’s request

DUBAI: Saudi Aramco, the world’s largest oil company, is to increase crude production to record levels in a bid to win market share in the global tussle over energy prices.

In a statement to the Tadawul stock exchange in Riyadh — where the shares are listed — the company said: “Saudi Aramco will provide its customers with 12.3 million barrels per day of crude oil in April, an increase of 300 thousand barrels per day over the company’s maximum sustained capacity of 12 million barrels. The company has agreed with its customers to provide them with such volumes starting 1 April.”

It added: “The company expects that this will have a positive, long-term financial effect.”

The announcement — coming in the middle of unprecedented volatility in global energy markets — was preceded by a brief suspension of its shares on the Tadawul, at its own request, as is required when a listed company is about to announce a “material event.”

The move to increase output dramatically follows notification to customers that Aramco would offer big discounts around the world, and further ratchets up the pressure on global energy markets.

It was followed by an immediate response by Russia, the world’s second biggest producer, with its own output increase.

Aramco shares, which had opened significantly higher despite the global market falls of “Black Monday” the previous day, continued their rise after the announcement, closing at SR31.15 ($8.30), a jump of 9.98 percent on the day.

The Tadawul All Shares Index (TASI) — which had also suffered in the global shares rout on Monday — reflected the improvement in its biggest constituent, with a rise of 7 percent on the day.

Global energy markets recovered some of the ground they lost on Monday, when crude prices had initially suffered their biggest falls in three decades. Brent crude, the benchmark for Middle East trading, was 8.5 percent higher at $37.27 as US markets opened.

The recent market volatility came when ministers from the Organization of the Petroleum Exporting Countries (OPEC) — in which the Kingdom is the biggest producer — failed to reach an agreement with other producers at the Vienna OPEC+ talks last weekend 

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Market sentiment was improved by what analysts took to be a conciliatory statement from the Russian leadership — which heads the non-OPEC producers — about the disagreement.

Dmitry Peskov, spokesman for the Russian President Vladimir Putin, told journalists in Moscow that Russia did not rule out the possibility of a compromise on oil output after the Vienna breakdown, which he said had been foreseen by the Russian energy minister, Alexander Novak.

“Now we see relative volatility, which, most likely, will continue for some time. A variety of options were calculated and considered in advance (of the Vienna meeting),” Peskov said.

But Moscow also announced plans to ramp up its own production, with Novak later outlining plans to lift output by between 300,000 and 500,000 barrels per day to possibly as much as 11.8 million barrels.

Energy industry experts said that Aramco’s move to dramatically increase production would probably involve removing oil from storage for sale on global markets. If it produces 12.3 million barrels per day that would be around 20 percent higher than its previous production level, and 300,000 more than its “maximum sustained capacity.”

With both Riyadh and Moscowpumping oil at record levels, the pressure is now on the US shale industry, which has higher production costs and which is heavily leveraged in financial terms.

Other big OPEC producers like Iraq and Nigeria also said they would raise output. Energy markets face an unprecedented scenario in which big supply increases by the major producers are taking place as global demand falls by record amounts because of the economic effects of the coronavirus outbreak. 


Foreign investors free to sit on Saudi business chamber boards

Updated 10 min 18 sec ago

Foreign investors free to sit on Saudi business chamber boards

Foreign investors free to sit on Saudi business chamber boards
  • Council of Chambers to become the Chambers Association

LONDON: Foreign investors are to be allowed to sit as directors on the boards of Saudi chambers of commerce for the first time.

The move is aimed at boosting  competitiveness and business activity in the Kingdom, the Saudi Ministry of Commerce said in a statement.

The new system will also mean that more than one chamber of commerce can be established in the same region.

Reforms to the country’s business chambers come as part of a broader push to modernize the economy, slash bureaucracy, and create jobs for Saudis.

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New companies will be exempted from the chamber’s subscription fees for a period of three years starting from the date of commercial registration.

In addition to revoking the Saudi citizenship rule, companies joining business chambers will be exempt from paying subscription fees for three years. The reforms also scrap the requirement to take out a new subscription for additional company branches.

“This is an encouraging development for overseas investors looking to expand in the Kingdom,” said Ed O’Reilly, executive director of Dubai-based 4Front Consultants, a technology company with operations in Saudi Arabia.

Under the new plans, the old Council of Chambers will become the Chambers Association and the changes will also see the creation of a supervisory body to monitor performance, while allowing the holding of meetings and voting through electronic means.

Saudi Arabia carried out a record number of business reforms last year, according to the World Bank Group’s Doing Business 2020 report, helping to put the country into the top 10 of global business climate improvers.

The Kingdom made the greatest improvement in the area of starting a business — costing 5.4 percent of income per capita for an entrepreneur to set up, compared with the wider regional average of 16.7 percent.