BP share price in freefall as Saudi Arabia escalates price war with Russia

The oil and gas major continues to see shares plummet as oil prices look to fall further as Saudi Arabia unveils plans to ramp up output, intensifying the chances of a price war with Russia.

BP shares closed 3% lower on Wednesday after Saudi Arabia unveiled plans to increase oil output in a move that could lead to an all-out price war with Russia.

State-owned oil producer Saudi Aramco told investors on Wednesday that the Saudi energy ministry had requested that it increase its production capacity by 1 million barrels per day (bpd) to 13 million bpd.

The threat of an oil price war amid weakening demand due to the coronavirus outbreak caused the commodity to suffer one of its sharpest one-day falls on Monday, with the price of the black stuff tumbling as much as 30%, with it nearly dipping below $30 a barrel.

BP closed at 316p a share on Wednesday.

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Oil prices almost halved in 2020

The threat of an all-out price war between Saudi Arabia and Russia pushed oil prices 3% lower on Wednesday, with Brent crude down $1.17 to $36.05 a barrel while the US West Texas Intermediate (WTI) fell $1.13 to $33.23.

Oil prices have almost halved in value since the start of 2020.

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‘This bold move to attempt to order production to 13 (million) barrels confirms that Saudi is trying to apply maximum pressure on both Russia and the US,’ Cailin Birch, a global economist at the Economist Intelligence Unit (EIU), told CNBC via email on Wednesday.

‘By sending signals that they will flood the market as soon as possible, they may be hoping to either force Russia back to the negotiating table or to prompt a wave of bankruptcies and investment cuts in the U.S. that would have a noticeable impact on shale production,’ Birch said.

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