Saudi Aramco to boost capacity; Abu Dhabi to increase supply

Saudi Aramco to boost capacity; Abu Dhabi to increase supply

Oil fell a third day as the horror show for crude investors continued on Friday amid panic about evaporating demand from the coronavirus pandemic, with Brent set for its biggest weekly loss since 1991 and US crude heading for its worst week since 2008. The official did not say how much oil would be bought for the reserve, which now holds 635 million barrels. Saudi Arabia, OPEC's de facto leader, wanted deeper and more prolonged cuts to counter the effect of the spread of coronavirus on demand.

Treasury Secretary Steven Mnuchin also put Russia on notice, speaking to Ambassador of the Russian Federation to the United States Anatoly Antonov in which he "emphasized the importance of orderly energy markets", according to a statement following the heavy selling. In addition, Riyadh significantly reduces the prices of its oil, while production is increased. But when Russian Federation refused to budge, the Kingdom altered its game plan, went on the offensive and intensified what many observers have described as an aggressive strategy to reclaim market share.

The schism between the former OPEC+ allies appeared to harden as Russian oil producers said they plan to ramp up production next month, while the Kremlin said there are no plans for discussions with Saudi Arabia. Drone and missile attacks on two of Aramco's biggest oil facilities in September temporarily slashed production by more than half, but didn't cause a big surge in prices. Oil prices have fallen almost 50% from highs reached in January and had their biggest one-day decline on March 9 since the 1991 Gulf War.

Oil giant said Sunday its net income dropped by $22.9 billion in 2019 to $88.2 billion.

The kingdom said last week Aramco will pump 12.3 million barrels of oil per day, boosting output by at least 2.5 million bpd.

Aramco's future results are likely to continue to be strongly influenced by the policies of its main owner, Saudi Arabia. The decision a year ago to float shares in the world's most profitable company was a central part of Crown Prince Mohammed bin Salman's economic and political reform agenda. It costs them less than anyone else to extract crude and they can do it much more cheaply than shale producers in the United States. This led to competition amongst the buyers prompting oil costs to go up again. They simply can not play hardball with their state-owned counterparts of the Middle East.

Aramco executives briefing Wall Street analysts on Monday may face tough questions about how they've become tools in the kingdom's price war with Russian Federation.

"US companies will feel pain, but shale has proven to be remarkably resilient".

Oil is ending the week with the biggest plunge in prices since 2008, as major producers prepare to drench the market with supply just as the coronavirus crushes demand. "So, we're going to fill it up".

"One of the key things from the company now is how they manage the capex to lift production", said Christyan Malek, head of JP Morgan Chase & Co.'s oil & gas research for Europe, the Middle East and Africa.

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