Saudi Arabia prepares to flood the oil market

The Saudi Energy Ministry has told Aramco to increase its oil production capacity to 13 from 12 million bpd, the company’s chief executive Amin Nasser said in a statement.

The news comes on the heels of an Aramco filing with the Saudi bourse that it would raise oil production next month to 12.3 million bpd.

According to the filing, Aramco “will provide its customers with 12.3 million barrels per day (MMBD) of crude oil in April; i.e., an increase of 300 thousand barrels per day over the Company’s maximum sustained capacity (MSC) of 12 MMBD.”

However, the current capacity of the company is around 12 million bpd, suggesting it would take oil from storage to hit its April production target. If it plans to keep the pressure on for longer, it would clearly need to increase production capacity.

“The company is exerting its maximum efforts to implement this directive as soon as possible,” Nasser said in the statement.

Saudi Arabia took to arms this weekend, after Russia said it would not participate in deeper production cuts, with Energy Minister Alexander Novak adding the country’s oil companies will resume normal production from April. This could add some 300,000 bpd to current production rates or up to 500,000 bpd.

Saudi Arabia, meanwhile, has been cutting a lot more than its quota, so it has more barrels to add to global markets. These intentions also signal it was unwilling to resume talks with Russia, which the Russian side had said were not off the table despite their disagreement on deeper cuts.

Saudi Arabia is also cutting the prices of its oil. At between $6 and $8 per barrel, the cuts will be the deepest for buyers in northwestern Europe and the United States, the Saudi state company said over the weekend.