Saudi Arabia and Russia are set to stir up an oil price war as they prepare to boost their crude oil production levels at the beginning of April, after the two oil heavyweights failed to agree to curb their outputs at the OPEC+ meeting last week.
Saudi Aramco, the world's largest crude oil exporter's national oil company, said Tuesday that it would provide its customers with 12.3 million barrels per day (bpd) of crude oil starting from April 1.
That level is "an increase of 300,000 per day over the company's maximum sustained capacity of 12 million bpd," according to an announcement it made on the Saudi stock exchange, Tadawul.
The world's largest crude oil exporter currently produces approximately 9.7 million bpd of crude oil, according to OPEC's Monthly Oil Market report for February.
Saudi Aramco said in the statement that it expects the decision to ramp up production would "have a positive, long-term financial effect" for the market.
Saudi Arabia, in alliance with Russia since December 2016, formed the group known as OPEC+, and made three oil production cuts to date.
The alliance, however, now looks fragile after the two heavyweights failed to agree deeper output cuts, and with Russia signaling Tuesday that it could also increase its crude oil production.
Russian Energy Minister Alexander Novak announced Tuesday on the Rossiya 24 news channel that the country may boost production by 250,000-300,000 bpd in the short term and up to 500,000 bpd in the longer term.
Noting that it will take months for oil prices to recover from their lowest level in four years, he did not rule out any future cooperation with Saudi Arabia and OPEC.
"I want to say the doors aren't closed," he said, ahead of the next OPEC meetings that are due to be held in May and June,katkılarında adding that failure to reach deal last week "Does not mean that in the future we can't cooperate with OPEC and non-OPEC countries."
Saudi Arabia-led OPEC and Russia-spearheaded non-OPEC could not agree on measures to further curb oil production on Friday after their seven-hour meeting ended in the Austrian capital Vienna.
Riyadh also decided Saturday to apply huge discounts for its crude exports to its customers starting from next month, igniting an oil price war.
Coupled with the coronavirus-related low oil demand, this caused a slump in crude prices with international benchmark Brent crude sinking as low as $31.27 per barrel on Monday and American benchmark West Texas Intermediate falling to as much as to $27.34 a barrel.
While both benchmarks marked their lowest levels since Feb. 12, 2016, they also posted more than a 30% decline -- the largest single daily percentage loss since January 1991 during the Gulf War.
Both Riyadh and Moscow are facing the risk of having budget deficits this year if oil prices remain below $40 per barrel.
Saudi Arabia, whose economy largely depends on crude exports, needs oil prices in the region of around $80-$85 per barrel to balance its budget. Russia, however, requires oil prices to be around $42-$45 per barrel.
By Ebru Sengul Cevrioglu, Ovunc Kutlu