Saudi Arabia and Russia had a falling-out over the weekend about controlling production levels and prices. As a result Saudi Arabia is going to cut prices and increase production.
They have announced they will cut prices by somewhere between $6 and $8 a barrel in April, depending on destination.
If I understand the articles correctly, they will increase production from 9.7 million bopd in January to 10 million bopd next month and increase to 12 million bopd if needed.
Prices dropped about 20% in early trading Sunday evening. Brent crude is down to $38.
Saudi Arabia did something similar back in 2014, but their goal then was to crater the production in the American shale oil field. That didn’t work.
The goal this time is to take away market share from Russia. The inferred goal is to hurt Russia enough that they return to the negotiating table and get back on board with plans of Saudi Arabia.
- 3/8/20 – Wall Street Journal – Saudis Instigate Oil-Price Clash With Russia
- 3/8/20 – Calgary Herald from Bloomberg news – Saudis Plan Big Oil Output Hike, Beginning All-Out Price War