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Oil futures saw renewed pressure Wednesday after Saudi Arabia moved to increase crude output capacity, it’s latest move in a price war with Russia that’s sent crude prices tumbling to four-year lows and sent shock waves through global financial markets.
West Texas Intermediate crude for April delivery CLJ20, -3.93% on the New York Mercantile Exchange dropped $1.04, or 3%, to $33.32 a barrel. The global benchmark, May Brent crude BRNK20, -4.11% dropped $1.29, or 3.5%, to $31.60 a barrel on ICE Europe.
April WTI “was trading around $34.68 when the Saudi increase in production headline hit the tape a little before 3 a.m. (Eastern). The market had already been sliding from the $36.35 overnight high after the Trump administration economic stimulus failed to materialize,” said Robert Yawger, director of energy at Mizuho Securities USA, in a note.
Saudi Arabia unveiled plans to boost oil-production capacity to a record 13 million barrels a day, The Wall Street Journal reported. Russia on Tuesday said it would increase output to respond to signals Saudi Arabia was preparing to boost production.
Oil prices bounced Tuesday, taking back a chunk of the nearly 25% plunge seen Monday, the biggest one day loss for both Brent and WTI since the Gulf War in 1991, as traders prepared for the price war to flood the world with crude at the same time demand is under pressure from the spread of the COVID-19 epidemic.
The Russia-Saudi battle comes after Moscow rejected calls by the Organization of the Petroleum Exporting Countries to deepen existing production cuts. Talks in Vienna collapsed Friday, meaning existing curbs will expire at the end of March and that OPEC members and their erstwhile allies can pump freely.
See: Why Russia wants to crush U.S. shale oil producers in price war
Storage data will also be in focus. The American Petroleum Institute late Tuesday reported that U.S. crude supplies rose by 6.4 million barrels in the week ended March 6, according to sources. The industry group also said gasoline stockpiles fell 3.1 million barrels, while distillate inventories were down 4.7 million barrels.
More closely watched data from the Energy Information Administration is due Wednesday morning. Analysts polled by S&P Global Platts, on average, look for crude inventories to rise by 2.5 million barrels, while gasoline and distillates are each seen down by 2.7 million barrels.
April gasoline RBJ20, -3.13% was off 2.7% at $1.1252 a gallon, while April heating oil HOJ20, -1.96% dropped 1.4% to $1.2324 a gallon. April natural gas NGJ20, -0.05% dropped 1% to $1.916 per million British thermal units.
