As Saudi Arabia instructs Aramco to boost oil production levels to unseen levels, crude oil prices have tumbled to prices not seen since 2016 in the U.S.
West Texas Intermediate crude, set at the tank storage facilities in Cushing, Oklahoma, dropped $1.75 to $26.95 per barrel. Brent Crude in London fell $1.23 to $28.82.
Natural gas was down too, falling about 9 cents to $1.73 Mcf.
More declines are expected as Saudi Arabia and Russia fight for market share.
Crude oil marks another finish at four-year lows, and analysts say more declines may follow as the coronavirus hurts demand and Saudi Arabia and Russia battle for market share.
“We believe we have not seen the worst of the price rout yet,” says Bjornar Tonhaguen of Rystad Energy. “The market will soon come to realize that the it may be facing one of the largest supply surpluses in modern oil market history in April.”
Saudi Arabia’s move to flood the market with oil comes as the country plans to boost oil exports in May to a record 10 million barrels a day.
In order to achieve this level of exports, the Kingdom is trying to reduce its domestic consumption, which it expects to replace with natural gas from the Fadhili gas plant.
Saudi Arabia’s Energy Ministry issued a statement on Tuesday claiming that “Saudi Arabia will utilize the gas produced from the Fadhili gas plant to compensate for around 250,000 barrels a day of domestic oil consumption, which will enable the Kingdom to increase its crude exports during the coming few months to exceed 10 million barrels a day.”
The market drop also affected Oklahoma oil and gas companies. Devon fell $1.11 a share to $6.46 after closing Monday at $7.57.
SandRidge Energy actually saw a 3-cent increase by finishing the day at 93 cents a share after closing Monday at 90 cents. The company’s 52-week high was $9.35.
Chesapeake Energy gained $0.0125 finishing at 21 cents a share.
ConocoPhillips added 17 cents and ended the day at $26.25 per share. ONEOK took a drop of $3.52 and finished at $21.48 per share for the day.
Valero was down $2.61 at $39.02 per share. AEP, parent company of PSO in Oklahoma plunged $9.53 a share and ended the day at $91.20. It was a decline of 11.68%.