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Saturday, April 13, 2024

Oil prices gain but Saudi hikes output to escalate price war

To avenge Russian rejection of the OPEC deal, Saudi has launched a price war. The price war aims to bankrupt Russia or force it to accept the deal. Yesterday oil prices plunged to 30 year low. Today it gained 8 percent but Saudi Aramco announces more production - pushing oil prices further low.

Energy titan Saudi Aramco said Tuesday it will boost its supply of crude oil to 12.3 million barrels per day in April, flooding markets as it escalates a price war with Russia.

“Saudi Aramco announces that it will provide its customers with 12.3 million barrels per day of crude oil in April,” the company said in a statement to the Saudi stock exchange.

Oil prices gained 8 per cent on Tuesday after losing 25 per cent of its price value. It is major one-day loss since Gulf War. The gain comes as the investors see the possibility of economic stimulus despite a price war between top producers Saudi Arabia and Russia.

Brent crude futures gained $2.51, or 7.3pc, to $36.87 a barrel by 0418 GMT, while US West Texas Intermediate (WTI) crude gained $2.15, or 6.9pc, to $33.28 a barrel.

The world’s biggest crude exporter has been pumping some 9.8 million bpd which means it will be adding at least 2.5 million bpd from April.

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

Saudi Arabia says it has an output capacity of 12 million bpd but it is not known for how long it can sustain such levels.

The kingdom also has dozens of millions of barrels of crude stored in strategic reserves to be used when needed and is expected to use it to provide the extra barrels to the global market.

Read more: OPEC’s oil price strategy fails miserably: What’s next?

Riyadh has already slashed the price of its oil to all parts of the world starting from April after OPEC and its allies, notably Russia, failed on Friday to clinch a deal on additional output cuts to boost sagging prices.

On Sunday, shares in the energy-dependent Gulf and other Asian states including Pakistan plunged to multi-year lows after the failure to clinch a deal on production cuts, with all seven bourses in the region in the red.

AFP with inputs from GVS News Desk