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Saudi Arabia Orders Oil Production Capacity Increase

2020-3-11

Saudi Arabia has directed the state oil company Aramco to increase its total possible oil production, or capacity. It announced the move at the Saudi Tadawul stock exchange Wednesday.

A short time later, Abu Dhabi’s oil and gas company ADNOC said it was increasing production by 25 percent to 4 million barrels per day.

A security person wears a mask as he checks a vehicle entering a compound for Saudi Aramco in Jiddah, Saudi Arabia, Monday, March 9, 2020.
A security person wears a mask as he checks a vehicle entering a compound for Saudi Aramco in Jiddah, Saudi Arabia, Monday, March 9, 2020.

Saudi Arabia is working to flood the market after another oil producer, Russia, refused to agree to oil production cuts.

Worldwide, demand for oil is decreasing as the spread of the new coronavirus has interfered with travel, transport and other industries.

Saudi Arabia said earlier this week it would increase its oil production to 12.3 million barrels a day starting in April. That is 300,000 barrels per day more than Aramco’s current production. Now the company says it will produce up to 13 million barrels per day.

Aramco also said Wednesday that the Saudi Energy Ministry, led by Crown Prince Mohammed bin Salman, ordered the increase.

Saudi Arabia had been producing around 9.8 million barrels per day. That amount was in line with an agreement among a number of oil producing nations, including Russia. The cuts were an attempt to stop the oversupply in the market that had pushed prices down.

However, a few days ago, the kingdom’s policy changed completely when Russia refused to go along with deeper cuts.

Saudi Arabia is a member of the Organization of Petroleum Exporting Countries, or OPEC. It is expected that other members of that group will also increase production.

Abu Dhabi’s ADNOC on Wednesday said it would increase output from about 3 million barrels to over 4 million barrels of oil a day starting in April. In addition, the company said it would move up its plans for a 5 million barrels a day production goal. ADNOC said its plan to increase production was made in reaction to the market.

Experts say it appears Saudi Arabia hopes to pressure Russia by controlling market share in a price war.

The price of unprocessed, or crude oil went down 25 percent on Monday. It was the sharpest decrease since the 1991 Gulf War. By yesterday, the price had increased a small amount. By the end of trading, oil was at $36 a barrel.

Eurasia Group is a private business that researches and advises clients about political risk. It describes the current oil situation as a crisis that could last “several weeks or months, until prices are low enough to change fundamental views in Moscow and Riyadh” and force a compromise.

I’m Susan Shand.

The Associated Press reported this story. Susan Shand adapted it for VOA Learning English. Caty Weaver was the editor.

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Words in This Story

barrel n. a round usually wooden container with curved sides and flat ends

client n. a person who pays a professional person or organization for services

fundamental adj. of or relating to the basic structure