Earlier this month, the company announced it would increase production capacity to 13 million barrels per day. Back in 2017, when oil prices were dropping, the OPEC countries, led by Saudi Arabia and Russian Federation, came together to form a partnership of sorts to stabilise the markets and keep the prices high.
Saudi Aramco on Sunday said it plans to cut capital spending in the wake of the coronavirus outbreak, and also posted a plunge in profit for previous year, missing forecasts in its first earnings announcement as a listed company.
Sources previously told Reuters Saudi Arabia is also seeking to replace Russian oil with Chinese and Indian buyers, although not all refiners received volumes they had asked for.
While the impact of the virus on global demand over the rest of 2020 and into 2021 is a huge factor for prices, overshadowing all that is the volume and price war between the Saudis (and some allies such as the UAE) and Russian Federation. But prices got a late boost from the president after settlement.
Worldwide benchmark Brent crude traded over $33 a barrel Sunday, with analysts anxious the price could further drop.
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The Saudis have slashed oil prices and said they'd ramp up production to 12.3 million barrels a day in April, a record. "It is possible that Trump applies tariffs on oil imports, but that will not help U.S. oil exports - these will have to compete against Saudi and United States oil that is prepared to go quite low indeed", Ellinas said. The average break-even price for USA oil producers is in the US$48 to US$54 range, and United States producers are now much more heavily indebted than they were six years ago. For the week, Brent is set to fall almost 28%, the biggest weekly decline since the week of January 18, 1991, when it fell 29% at the outbreak of the first Gulf War. According to the Federal Reserve Bank of Dallas, $50 per barrel is the price at which it becomes profitable to drill a new well in the US. The 13 countries in the OPEC are Iran, Iraq, Saudi Arabia, UAE, Kuwait, Algeria, Angola, Equatorial Guinea, Libya, Nigeria, the Republic of Congo, Venezuela and Gabon.
Russia, the world's second-largest producer, does not appear willing to return to its agreement on curbing output with the Organization of the Petroleum Exporting Countries (OPEC). Others as disciples gaze as grass widows whose husbands would be away for prolonged periods. Even if the coronavirus scare fades, excess supply from Saudi Arabia and Russian Federation will persist.
The high price today reached $33.87. Crude oil guarantees foreign reserves for transactions by oil-dependent nations. While it costs Saudi Arabia under $10 a barrel to produce its oil, the kingdom's government budgets for this year had projected oil at $55 a barrel, signalling that cuts are likely.
However, an analyst says that apart from China, the epicentre of COVID-19, the price war is a tripartite one.
Saudi Arabia may need to borrow money to fill the gap between what it spends and the income it receives.
"The end of OPEC+ was long overdue and lower prices are here to stay at the very least for the next couple of quarters".