DUBAI: Saudi Arabia is to boost its oil output to record levels in a move that prompted “shock and awe” in global energy markets on Tuesday.
From next month Saudi Aramco will supply global customers with 12.3 million barrels of crude oil per day — 300,000 more than its existing maximum capacity.
Analysts said some of the balance could come from the Kingdom’s big reserves.
“The company expects that this will have a positive, long-term financial effect,” Aramco president and chief executive Amin Nasser said in a statement to the Tadawul stock exchange in Riyadh.
Prince Abdul Aziz bin Salman, the Kingdom’s energy minister, said: “In a free market, every producer needs to demonstrate its competitiveness, and preserve and increase its market share.”
Aramco shares were briefly suspended before the announcement, but resumed an upward path when trading resumed, ending the day nearly 10 percent higher at SR31.15.
Russia will also raise output to unprecedented levels, with an increase of up to 500,000 barrels a day bringing total production to 11.8 million barrels.
The upheaval began at the end of last week, when OPEC countries led by Saudi Arabia and non-OPEC producers led by Russia failed to reach agreement on continued production cuts to stabilize the market.
“Saudi Arabia is pursuing a ‘shock and awe’ strategy to demonstrate it has the capacity to raise supply faster than any other producer, said Olivier Jakob, director of Swiss oil consultancy Petromatrix.
“It is demonstrating its might to those who do not want to co-operate in the supply agreement.”
In Moscow, there were hints of a more conciliatory approach.
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Kremlin spokesman Dmitry Peskov did not rule out a compromise on output levels, although he admitted volatility in global energy markets could continue “for some time.”
Prince Abdulaziz appeared in no mood to compromise.
“I fail to see the wisdom of holding meetings in May or 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 said.
Brent crude recovered some ground lost in the “Black Monday” crash, and rose about 4 percent to just under $38.
Wall Street, also rattled by the global coronavirus outbreak, was volatile after the previous day’s losses.
The Dow Jones Industrial Average opened strongly, fluctuated all day between gains and losses and closed nearly 5 percent up in a late surge after White House hints of a fiscal stimulus.