Saudi Arabia ramps up oil production to record level

Saudi Arabia will once more be the world’s biggest producer of crude oil under plans announced Wednesday to further increase the Kingdom’s output to a new record level. (Saudi Aramco)
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Updated 12 March 2020

Saudi Arabia ramps up oil production to record level

  • Saudi Aramco to increase its maximum sustainable capacity — the limit to the crude it can produce over the long term — to 13 million barrels per day
  • Increase would enable the Kingdom to leapfrog the US as the number one crude producer, pushing Russia into third place

DUBAI: Saudi Arabia will once more be the world’s biggest producer of crude oil under plans announced Wednesday to further increase the Kingdom’s output to a new record level.

Prince Abdul Aziz bin Salman, the Saudi energy minister, told Saudi Aramco to prepare to increase its maximum sustainable capacity — the limit to the crude it can produce over the long term — to 13 million barrels per day.

That would enable the Kingdom to leapfrog the US as the number one crude producer, pushing Russia into third place. Analysts said the new capacity would come from expansion and enhancement of production from existing fields.

Aramco, the biggest oil company in the world, had already announced it was planning to increase output to 12.3 million and would slash prices to customers around the world after the collapse of the OPEC+ agreement in Vienna at the end of last week.

A statement from Aramco to the Tadawul stock exchange, where its shares are quoted, said: “Saudi Aramco announces that it received a directive from the Ministry of Energy to increase its maximum sustainable capacity from 12 million barrels per day to 13 million,” in accordance with a 2017 royal decree.

In another sign of Saudi preparations for an oil export surge, the National Shipping Company, Bahri, was reported to be considering the hire of at last eight extra supertankers to export crude from the Kingdom.

The moves by the Saudi authorities represent a further escalation in the “price war” that broke out after Vienna, as another big Middle East producer, the UAE, also said it would dramatically increase production.

The Abu Dhabi National Oil Company (ADNOC) said it was planning to lift production from 3 million to 4 million barrels per day from next month, and would accelerate plans to lift the total to 5 million daily barrels, in addition to offering big discounts to customers.




‘We are in a position to supply the market with over four million barrels per day in April,’ Sultan Ahmed Al-Jaber, ADNOC’s group chief executive, said in a statement. (AFP)

“In response to market conditions, and to provide better forward visibility to our customers, we shortly announced forward prices for March and April,” said ADNOC chief executive Sultan Al-Jaber, adding that the new pricing would be based on its flagship Murban crude oil and traded in its new exchange ICE Futures Abu Dhabi.

Other big producers, including Nigeria and Iraq, have also said they would lift output. The price of Brent crude on international markets fell by nearly 4 percent to $36.25.

Shares in Saudi Aramco fell nearly 5 percent to $29.70, while the Tadawul Index, the TASI was down nearly 3 percent.

In Russia, whose unwillingness to participate in a further round of output cuts sparked the price war, energy minister Alexander Novak has called a meeting of the country’s top oil companies tomorrow to discuss the turmoil on global markets.

He said that the decision by Saudi Arabia to raise output and cut prices was “probably not the best option,” but that he remained in telephone contact with OPEC ministers and would take part in an OPEC+ technical committee later this month.

Another Russian businessman with strong ties to Saudi Arabia sought to defuse the tension.

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Kirill Dmitriev, chief executive of the Russian Direct Investment Fund, said that the two countries would continue to develop investment partnerships, “despite attempts to dissolve them.” 

The joint investment fund between Russia and Saudi Arabia would “continue to work”, he told journalists.

“There are differences on some energy issues but Russia has developed a partner relationship with Saudi Arabia and this relationship will continue,” Dmitriev said.

In the US, whose oil industry is regarded as especially vulnerable to a price war, the White House let it be known that it was considering federal aid to shale companies in politically-sensitive states like Texas and Pennsylvania. 

President Trump has greeted the fall in oil prices as “good for consumers” but is believed to be worried about the repercussions for heavily-indebted shale companies.

After two rollercoaster days on global stock markets because of coronavirus fears and the oil price war, the main Wall Street index, the S&P 500, opened around 3 percent down.


Despite agreement, China purchase of US agriculture lags

Updated 18 min 9 sec ago

Despite agreement, China purchase of US agriculture lags

  • The two sides are set to meet on Saturday to discuss the deal, American media says

NEW YORK: Seven months after the United States and China signed a preliminary agreement to temper their trade war, Beijing’s purchases of US agricultural goods have yet to reach the deal’s target.

As President Donald Trump readies for a tough reelection battle in November, US media reported the two sides are set to meet beginning August 15 to discuss the deal, which calls for China to sharply increase buying American goods and services this year and next.

But according to data compiled by the Peterson Institute for International Economics (PIIE), Chinese agricultural purchases at the end of June were far from where they should be at this point in the year.

They had reached only 39 percent of their semiannual target, according to US figures, or 48 percent, based on Chinese figures.

“If we get back to what the level of trade was in 2017, we’ll be lucky,” said Chad Bown, a PIIE senior fellow who authored the study, referring to the year before the trade war began.

Under the deal’s terms, China agreed to increase agricultural imports $32 billion over the next 2 years from 2017 levels.

Chinese orders for corn and soybeans have increased since mid-July, with Beijing buying just over 3 million tons of American oilseeds between July 14 and Aug. 7, according to US Department of Agriculture data.

At the end of July, the United States reported the largest-ever daily order by China for its corn, of 1.9 million tons.

The announcements were a relief to US farmers, who are expecting a bumper crop this year and need to find buyers to take it.

They also came at a time of high political tension between the two countries, after the Trump administration authorized sanctions against several Hong Kong leaders over the rights crackdown in the city, and restrictions on Chinese apps WeChat and TikTok.

The Chinese “realize we’re not being the best of buddies right now, but they need the products and they’re gonna take as much as they need,” said Jack Scoville, agricultural market analyst for Price Futures Group.

It’s possible that Beijing will change its orders from buying this year’s harvest to next year’s.

But analysts warn that any orders could be called off before the ships carrying them leave port.

Brazil and Argentina, two of the world’s largest soybean and corn producers, are starting their harvests next spring, said Brian Hoops, president of the brokerage firm Midwest Market Solutions.

China “could cancel all these purchases they made in July and buy at much cheaper prices if that’s available to them,” Hoops said.

The trade deal dubbed “phase one” and signed in January has managed to survive both the tensions and the sharp global economic downturn caused by the coronavirus pandemic, which has badly hit international trade.

US Trade Representative Robert Lighthizer in June said China would follow through on its commitments, while Washington would also pursue a “phase two” trade deal that “will focus on issues of overcapacity, subsidization, disciplines on China’s state-owned enterprises, and cyber theft.”

Bown said any success in getting China to buy not just farm but also energy and manufactured goods, would aid Trump in his reelection campaign.