Should it be that hell hath no fury like a Saudi scorned?
After being brushed aside by the Russians in their quest to cut oil supply by 1.5 million barrels per day, the Saudi Arabians decided to go the other direction and cut oil prices to take Russian market share. The kingdom also said it might increase oil supply to flood the already saturated market.
The announcement caused the energy market rout on Monday, which spilled into the general equity markets and drove down the major stock averages by 7% or more.
Now the Saudis are coming back for round two.
The national oil company, Saudi Aramco, announced it will raise crude production to 12.3 million barrels per day starting in April, which is 2.7 million barrels per day more than it produced in January, and is 300,000 barrels above its maximum sustained capacity of 12 million barrels.
The increased production will overrun the global oil markets where demand is softening because of falling economic activity due to the spread of the coronavirus. With global use just under 100 million barrels per day, the Saudis are adding 3% more oil just as people use less.
OPEC and a group led by Russia, collectively known as OPEC+, had been holding back oil production by about 2.1 million barrels per day. Clearly those days are over.
While the Saudi moves are aimed squarely at Russia, other oil producers will feel the pain of lower prices, including U.S. frackers.