Oil falls 25% after Saudi Arabia slashes prices
Saudi Arabia is preparing to increase its crude output by more than 10 million barrels per day (bpd) in April after the current production curb deal expires in late March, two sources told media sources on Sunday.
The world’s largest oil exporter is trying to punish Russia, the world’s second-largest producer, for not endorsing production cuts announced by the Petroleum Exporting Countries Organization (OPEC) last week.
Saudi Arabia, Russia and other major producers last fought for market share like this between 2014 and 2016 to try and squeeze out US production, which has risen to become the world’s largest oil producer as flows from shale oil fields have doubled their output over the last decade.
“Saudi Arabia and Russia are entering into an oil price war that is likely to be limited and tactical,” Eurasia Group said in a note.
“The most likely outcome of this crisis is entrenchment into a painful process that lasts several weeks or months, until prices are low enough to change fundamental views in Moscow and Riyadh back (to) some form of compromise on resumed OPEC+ production restraint,” Eurasia said.
Saudi Arabia opened the battle by cutting its official April sales rates for all crude grades to all destinations by $6 to $8 a barrel.