Saudi Arabia to increase oil output to record high

Saudi Arabia’s state-run oil giant Saudi Aramco said on Tuesday it would increase its crude oil production to 12.3 million barrels a day in April, a record amount.

The move seemed to make good on the country’s promise over the weekend to increase output after Russia refused to cooperate on cutting production. That led to a 25 per cent plunge in the price of crude on Monday, the sharpest decline seen since the 1991 Gulf War. International benchmark Brent crude traded up more than eight per cent Tuesday to over US$37 a barrel.

In a filing made Tuesday on Riyadh’s Tadawul stock market, Aramco – formally known as the Saudi Arabian Oil Company – said that the increase in production represented a rise of 300,000 barrels per day. Analysts said that likely would involve releasing stored barrels as well.

“The company has agreed with its customers to provide them with such volumes starting 1 April 2020,” it said in the filing. “The company expects that this will have a positive, long-term financial effect.”

Saudi Aramco shares, whose trade briefly halted before announcing the production decision, closed up 9.88 per cent in trading to 31.15 riyals, or US$8.30, giving the world’s most valuable company a valuation of US$1.66 trillion. That’s still below its initial public offering price of 32 riyals in December.

It came a day after Aramco shares collapsed by 10 per cent and were pulled from trading for reaching the Tadawul’s maximum permitted loss in a day, dropping its valuation to US$1.4 trillion. Aramco had offered only a sliver of its shares on the Tadawul for investors.

Aramco’s decision will likely flood global energy markets and put further pressure on prices. The company had reached US$2 trillion in its early days of trading in December.

The lower oil prices come as there’s less demand for air travel amid the spread of the new coronavirus around the world, further depressing prices.

AP