Saudi Arabia Gets Aggressive
March 11, 2020
President Donald Trump spoke with Saudi Arabia’s Crown Price Mohammed bin Salman on Monday to discuss global energy market , among other issues.
The US Department of Energy reported that it has suspended a sale of up to 12 million barrels of oil from the Strategic Petroleum Reserve due to the petroleum price drop. In late February, the Department of Energy announce a sale from the SPR, before the coronavirus outbreak and a price war between Saudi Arabia and Russia pressured crude prices.
Crude oil prices rose significantly yesterday by 10% after falling the day before by 24%, which was the largest one day drop since 1991 driven by Saudi Arabia and Russia at an all-out price war. Prices were also supported by news that US producers are making spending cuts and curtailing production. John Kilduff, of Again Capital, said that there was an almost immediate response form US oil producers to cut spending that will result in diminished oil output in the months ahead.
The API inventory report came out last night and it called crude oil stocks up 6.4 million barrels and the stocks of crude oil at Cushing, Ok were also up by 364,000 barrels. Gasoline stocks were down 3.1 million barrels and distillates were down 4.7 million barrels. The estimates from the Bloomberg survey for today’s DOE inventory numbers are calling crude up 2.149 million barrels, gasoline down 2.714 million barrels and distillates down 2.217 million barrels.
Saudi Arabia’s energy minister has directed oil producer Saudi Aramco to raise its output capacity to near 12.3 million bpd. CEO of Aramco, Amin Nasser, said the company is exerting maximum effort to implement this directive as soon as possible. Currently the production in just a bit under 10 million bpd.
Marathon Oil Corp is scaling back its drilling activity in some area and cutting its spending by at least $500 million, joining other shale oil producers in reducing drilling as oil prices fell to historic lows.
Cenovus Energy announced a nearly 32% cuts to its capital spending for the year and a temporary suspension of its crude-by-rail program amid the Saudi-Russian oil price war.