Saudi Arabia Increases Oil Production.

Saudi Arabia for the first time in the last decade announced a decision on increasing oil production capacity. The United Arab Emirates, its close partner at OPEC, followed a similar step.

Saudi Arabia, Wednesday, March 11, 2020, announced a decision to increase oil production capacity. This is the first time in more than a decade. This step was taken a day after Riyadh announced another step in the form of falling oil prices to be sent to the US. This action triggered the biggest oil price fall since the 1991 Gulf War.

The United Arab Emirates (UAE), a close partner of Saudi Arabia, took a similar step, namely to increase oil production capacity starting next April. Two The Gulf Arab state and members of the Organization of the Petroleum Exporting Countries have united against Russia, a non-OPEC oil producer, which rejects proposals for reducing world oil production.

The Saudi Arabian Energy Ministry has ordered oil-producing company Aramco to increase oil production capacity from 12 million barrels per day to 13 million barrels per day.

Saudi Aramco

"The company (Aramco) is exerting its utmost efforts to implement this directive as soon as possible," said Amin Nasser, CEO of Aramco.

There is no information about the time frame for implementing the policy. Increasing production capacity certainly requires billions of US dollars of investment. Aramco said the directives came from the Saudi Ministry of Energy. 

Prince Mohammed bin Salman (MBS)

    The energy policy of the royal state was generally controlled by the Crown Prince Mohammed bin Salman (MBS) and Energy Minister Prince Abdulaziz bin Salman who was still a blood relative of the MBS.

Currently, Saudi Arabia produces around 9.8 million barrels per day. This amount of production is an implementation of an agreement between OPEC and other oil-producing countries, including Russia, related to production cuts to reduce oil supply in the world market so that oil prices rise. 

    But since the end of last week, Saudi Arabia has taken dramatic steps that have triggered a collapse in oil prices. This was done after Russia refused to work together to reduce production. It is estimated, other OPEC member countries will follow the steps of Saudi Arabia.

By increasing oil production and lowering official prices for Asia, according to observers, Saudi Arabia wants to put pressure on Russia to dominate market supply and control prices. As a result of the oil price war caused by Saudi Arabia last Monday, crude oil prices dropped 25 percent, the biggest drop since the 1991 Gulf War. The price of Brent crude for May delivery fell 24 percent to 34.36 US dollars per barrel.

Selfie in Gulf War 1991

Moscow will raise the UAE, following Saudi Arabia's steps. The UAE national oil company announced Wednesday to increase supplies by more than 4 million barrels per day in April and increase production capacity to 5 million barrels per day.

The President Vladimir Putin

Moscow said Russian oil companies might also increase production to 300,000 BPD and could increase by 500,000 BPD. Russia indicated Tuesday it was ready to negotiate. However, Saudi Arabia insisted, there was little meaning if the negotiations would only confirm the inability to reach an agreement.

"Most likely the end of this crisis is the emergence of painful processes for several weeks or months until oil prices are low enough.

That way it can change the fundamental views of Moscow and Riyadh so that the two parties again reach a kind of compromise, "so the views of Eurasia Group, a political risk consulting company.

Stock market

Stock markets in Asia and Wall Street futures exchanges again depressed on Wednesday, March 11. Investors and market participants appear skeptical about Washington's stimulus package offer to fight the widespread Covid-19 outbreak, including in the United States, and the continued effects of the oil price war. 

   Many analysts say investors need to remain vigilant for further market volatility. This is because Covid-19 Wabab still raises risks to public health in many countries. If it drags on, the pressure on the global economy gets stronger.

Covid-19

The financial markets did seem to have recovered from a brutal global sell-off on Monday (March 9) triggered by a double shock, namely the collapse of oil prices and the worsening Covid-19 Plague. However, the increase appeared short-lived in early trading on Asian markets on Wednesday.

The stock market, US futures fell 1.54 percent and the MSCI index for Asia Pacific shares outside Japan dropped 0.04 percent. The Australian stock market is down 1.31 percent. Japan's Nikkei index erased earlier losses by rising 0.24 percent in early trade.

Earlier this week, US President Donald Trump said he would take "major steps" to defuse economic tensions caused by the spread of the coronavirus of the species. The headlines also focus on a discussion of the possibility of a payroll tax cut, a thing that helps lift market sentiment. However, the lack of continuation of talks on the topic has made some investors unimpressed and tend to be skeptical.

"We were promised something substantive from the Trump administration. If it hasn't come at this hour, there is a possibility of a delay, "said Michael Mc Carthy, chief market strategist at CMC Markets in Sydney Australia. "That's why the market has a negative tone.

From the perspective of global investors, there is still a lot of downside risk. " On Wall Street, the three major indices increased by almost 5 percent on Tuesday, one day after the US equity market suffered its biggest daily loss since the 2008 financial crisis.

Kompas, Page-5, Thursday, March 12, 2020