Trench warfare

11 March 2020 By George Hay, Dasha Afanasieva Follow @gfhay

The Saudi crown prince and Russian president’s crude supply pact has blown up into a full-on price war. On the face of it, Moscow’s budget means Vladimir Putin is better able to bear extended low prices. But Mohammed bin Salman also has options to keep the wolf from the door.

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Saudi Aramco on March 11 said it had been directed by the kingdom’s Ministry of Energy to raise its oil production capacity to 13 million barrels per day (bpd) from 12 million bpd now.

Saudi Arabia on March 10 said it would raise its crude supply to a record 12.3 million bpd in April, as it ratcheted up a standoff with Moscow over market share and appeared to reject Russian overtures for new talks.

Brent crude prices jumped by around 9% to $37.50 on March 10 a day after the biggest rout in nearly 30 years as investors eyed the possibility of economic stimulus and Russia signalled that talks with Organization of the Petroleum Exporting Countries remained possible.

Moscow said on March 9 it could withstand oil prices of $25-$30 per barrel for six years to 10 years. Riyadh, meanwhile, can afford oil at $30 a barrel, Reuters reported, but would have to sell more crude to soften the hit to its revenue, according to sources familiar with the matter.

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