Saudi Arabia to up oil production after Opec deal falls through
The Middle East’s stock markets tumbled on Sunday after the three year alliance between oil cartel Opec and Russia collapsed last week.
As a result of the botched negotiations over further production cuts, Opec removed all existing output curbs for its members, leading to a string of local equity markets falling over fears of a flooded market.
Saudi Arabia’s Tadawul index fell 8.3 per cent to hits its lowest level since November 2017, whilst Kuwait’s bourse recorded its largest ever single day loss.
Dubai’s index fell 7.9 per cent, while Abu Dhabi’s also dropped 5.4 per cent.
The fall came as Saudi Arabia was reported to be planning to ramp up production to nearly 11m barrels a day in April due to the Opec deal falling through.
Sources told Reuters that state-owned Saudi Aramco would increase its output when the current Opec+ deal runs out at the end of March.
Aramco also reported its worst day since December’s listing, trading below its offering price of 32 riyals for the first time.
Yesterday the oil behemoth cut its official selling price (OSP) for April for all its crude grades to all destinations in preparation for the deal’s expiry.
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For the last couple of months Saudi Arabia has limited its output to 9.7m barrels per day as it has taken the lead on Opec’s production curbs.
On Friday Russia refused to back deeper cuts to help protect the industry against the coronavirus outbreak, which has seen prices slump due to the stall in economic activity.
Opec, of which Saudi Arabia is the de facto leader, had been pushing to extend existing cuts of 2.1m barrels per day by another 1.5m barrels, of which the cartel’s allies would contribute 500,000 barrels.
However, when the deal fell through Opec removed all limits on its members productions, raising the spectre of 2014’s price collapse, when Russia and Saudi Arabia went toe-to-toe with the newly buoyant US shale oil industry.
Brent crude and West Texas Intermediate both shed a tenth of their value on Friday, falling to $45.27 and $41.28 respectively in anticipation of the supply glut.
At the start of the year Brent crude briefly traded at over $70, but is now priced at its lowest levels since 2017 as the coronavirus outbreak continues to batter the global economy.