Saudi Arabia pushes oil production to record high

Saudi Arabia’s state-run oil company said Tuesday that it would surge production in the face of a price war with Russia, pushing production of crude oil to record levels.

Reuters and The Associated Press reported that Saudi Aramco said in a filing on Riyadh’s stock market that the production increase would begin on April 1. As many as 12.3 million barrels per day will be produced, over the current rate of 9.7 million barrels per day.

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

Shares of Saudi Aramco reportedly jumped on the news though were still trading below the company’s IPO in December. The decision by Saudi oil officials comes as the country, along with OPEC members, previously petitioned for a worldwide reduction in oil production to respond to the outbreak of coronavirus, which has slowed oil consumption globally.

That plan was rejected by Russia, igniting a price war that has affected oil prices around the world.

Russian authorities told Reuters that price-stabilizing measures in conjunction with OPEC were still possible, while the Royal Bank of Canada pointed to the uniqueness of the situation in a statement.

“Price wars and pandemics are nothing new to the commodity markets, but both occurring simultaneously is something we have yet to witness in our careers,” RBC analysts said in a note.

“Such action will test the market’s self-balancing mechanism absent the backstop of OPEC, a mechanism that has not been tested since the U.S. shale boom was in its infancy.”