Saudi Arabia pledged to substantially increase its daily crude output Tuesday, escalating its price war with Russia as the two sides battle to win market share follow last week's OPEC meeting collapse.
Saudi Aramco officials in Riyadh said crude output would rise by more than 26% next month, to 12.3 million barrels per day, following the collapse of a three-year agreement between OPEC members and non-cartel allies, such as Russia, that had previously capped production at 9.7 million barrels per day.
The U.S. Energy Information Administration sees domestic output rising to 13.2 million barrels per day this year, and 13.6 million in 2021, as shale production continues to keep support American drillers.
The plans, however, failed to hold down a rally in global crude prices, sparked by a broader rebound in U.S. equity futures, with Brent crude futures contracts for May delivery rising 6.4%, or $2.21 higher from Monday's closing prices to change hands at $36.57 per barrel.
U.S. crude futures for April delivery, which are more tightly connected to domestic gas prices, jumped 7.4% higher, or $2.30 per barrel, to trade at just over their 2014 low at $33.43.
Last Friday in Vienna, OPEC leaders and non-member allies not only failed to agree a pact that would deepen production cuts and raise global prices, but were also unable to maintain their current output reductions.
With members now free to pump as much oil as they like from April 1, and the International Energy Agency forecasting its first drop in global demand since 2009 amid the coronavirus pandemic, the bottom fell out of crude markets Monday and prices fell more than 20% - the steepest single day decline since the first Gulf War in 1991.
Russia's energy minister, Alexander Novak, blamed the market "panic" on the fact that Saudi Arabia had been offering "additional discounts" to crude selling prices and cautioned it will take "several months" for global markets to recover and stabilize from the four-year lows that prices hit on Monday.