Saudi Aramco to Produce at Near Max Capacity Amid Price War
Saudi Aramco plans to ramp up production in April to around 12 million barrels once its current OPEC production quota expires, the company disclosed on Monday during its first earnings call since going public late last year. Aramco’s previously reported peak production stood at around 11.1 million barrels per day in November 2018.
Aramco’s President & CEO Amin Nasser further stated that Aramco could continue to pump around 12 million barrels per day into the market for the next year without any additional capex, and that the company was “very comfortable” with oil prices at around US$30 per barrel. The company also plans on drawing an additional 300,000 barrels per day from its existing storage to meet exports in April. Aramco also reported a profit of US$88.2 billion for 2019, a significant drop from 2018 earnings of US$111.1 billion. Despite this, the company has stated that it remains committed to its plans to pay its public shareholders a 37.5% annual dividend from 2020 to 2024 as promised in its IPO prospectus, amounting to US$75 billion.
Aramco’s declared intention to double down on its plans to flood the oil market has set the stage for a protracted oil price war with Russia and American shale oil producers, which has already seen international crude prices crash to their lowest levels since January 2016. Brent crude futures for May settlement dipped below US$30 per barrel on Monday, while WTI crude futures were trading around US$29 per barrel. The Brent-WTI differential has narrowed to its lowest level in more than two years, as international demand is projected to contract significantly more than that of the U.S., driving a drop in the premium that Brent normally commands as the leading international benchmark.
Aramco’s own share price closed down over 3% on Monday at SAR 27.8, down about 13% from its IPO price of SAR 32.0 and nearly 27% below its all-time peak of SAR38.0 set a few days after the company went public in mid-December.