Oil heavyweights Saudi Arabia and the UAE vowed on Wednesday to pump millions more barrels of crude as they stepped up a price war after Russia refused a deal to cut output.
OPEC kingpin Saudi Arabia and its ally the UAE, the cartel's fourth-largest producer, said they will together boost production by at least 3.5 million barrels per day (bpd), to 16.3 million bpd, from April.
Riyadh and Abu Dhabi, who rely heavily on oil revenues, also unveiled plans to raise their production capacities by one million bpd each.
Although increases in capacity take a long time and need huge investments, the announcements from Riyadh and Abu Dhabi add to the psychological warfare shaking oil markets.
Energy giant Saudi Aramco said it plans to raise its crude production capacity by one million bpd.
"Saudi Aramco announces that it received a directive from the ministry of energy to increase its maximum sustainable capacity from 12 million bpd to 13 million bpd," the company said in a statement to the Saudi Stock Exchange.
The decision came a day after Saudi Arabia, the world's top exporter, decided to hike production by at least 2.5 million bpd to a record 12.3 million from April.
The UAE national oil company said on Wednesday it was ready to boost its oil supplies by around one million bpd, from the current level of around three million bpd, as a price war with Russia simmers.
"In line with our production capacity growth strategy ... we are in a position to supply the market with over four million barrels per day in April," Abu Dhabi National Oil Co. (ADNOC) said in a statement.
"In addition, we will accelerate our planned five million bpd (output) capacity target," the state-owned firm said.
UAE Energy Minister Suheil al-Mazrouei said that extra oil supplies will be on the market soon.
"Operators in the UAE have ample production capacity that will be quickly brought online given the current circumstances," the minister wrote on Twitter.
The Saudi and UAE moves follow the collapse of an oil output reduction agreement between OPEC and non-OPEC producers, led by Russia.
The deal proposed by Saudi Arabia called for additional output cuts of 1.5 million bpd to cope with the severe economic impact of coronavirus which has sharply reduced world demand for crude.
OPEC on Wednesday lowered its forecast for global average daily demand by 0.92 million barrels, to 99.73 million barrels.
Oil prices fell heavily on Wednesday after the Saudi and UAE announcements, reversing gains made earlier in the day.
Mazrouei said he was disappointed that no agreement was reached by the OPEC+ alliance on production cuts and called for a new agreement.
"OPEC and OPEC+ played an important role in delivering market stability. The UAE ministry of energy and industry firmly believes that a new agreement is essential to support a balanced and less volatile market," the minister said.
The UAE has earmarked more than USD 132 billion in investments to raise its output capacity to 4.0 million bpd this year and to 5.0 million bpd in a decade's time.
Following the failure of the OPEC+ deal, Riyadh slashed the prices of its oil to various regions to secure market share.
ADNOC said it would also follow Saudi Arabia by announcing new prices for March and April deliveries.
Oxford Economics projected on Tuesday that the price of Brent crude will "fall to and remain at $30 a barrel for the foreseeable future."
"This could trigger recession in a number of Gulf Cooperation Council economies that are already battling the headwinds of slower global growth and the spread of coronavirus," the Britain-based group said.
Russia said Tuesday it was open to renewing cooperation with the OPEC cartel even after its rejection of proposed new output cuts led to the collapse of their alliance.
Brent North Sea crude oil was trading at $36.18 a barrel on Wednesday, down 2.8 per cent from the previous close.
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