Saudi aramco says to hike output escalating price war

A very interesting and timely topic!

Saudi Aramco, the state-owned oil company of Saudi Arabia, has announced plans to increase its crude oil production capacity to 13 million barrels per day (mb/d) by 2027, up from its current capacity of around 12.5 mb/d. This move is seen as a response to the escalating price war in the global oil market, driven by the ongoing COVID-19 pandemic and the increasing production from non-OPEC countries.

Here are some key points to consider:

  1. Price war: The global oil market has been experiencing a price war since the pandemic began, with prices plummeting to historic lows. This has been driven by a combination of factors, including reduced demand, increased supply, and a lack of coordination among major oil-producing countries.
  2. Saudi Aramco's response: By increasing its production capacity, Saudi Aramco aims to maintain its market share and influence in the global oil market. The company has already increased its production in recent months to meet growing demand, and this move is seen as a further response to the price war.
  3. Impact on prices: The increased production capacity is likely to put downward pressure on oil prices, which have already fallen significantly since the pandemic began. This could lead to further price volatility and potentially even lower prices in the short term.
  4. Global oil demand: The International Energy Agency (IEA) has forecast that global oil demand will recover slowly in the coming years, driven by the ongoing pandemic and the shift towards cleaner energy sources. This could lead to a prolonged period of low oil prices, making it challenging for oil-producing countries to balance their budgets.
  5. Competition from non-OPEC countries: The price war has also been driven by increased production from non-OPEC countries, such as the United States, Canada, and Russia. These countries have been able to increase their production quickly and cheaply, making it difficult for OPEC countries like Saudi Arabia to maintain their market share.
  6. OPEC's response: The Organization of the Petroleum Exporting Countries (OPEC) has been trying to coordinate with other major oil-producing countries to stabilize the market and support prices. However, the group has faced challenges in achieving consensus, particularly from countries like Russia, which has been increasing its production.

In summary, Saudi Aramco's decision to increase its production capacity is a response to the escalating price war in the global oil market, driven by the ongoing pandemic and the increasing production from non-OPEC countries. While this move may put downward pressure on oil prices in the short term, it is also a strategic decision aimed at maintaining the company's market share and influence in the long term.