The recent crash followed a statement issued by Saudi Arabia’s national oil company, Aramco, that it had been directed by the energy ministry to raise its production capacity by a million barrels per day (mbpd) to 13 million barrels per day from 12mbpd.
Brent crude price dipped by $1.25, or 3.4 per cent to $35.99 per barrel from $37.64 per barrel on Tuesday, while U.S. West Texas Intermediate crude (WTI) dropped $1.19, or 3.5 per cent to $33.15 per barrel, Reuters said.
Saudi Aramco Chief Executive, Amin Nasser said the state-run oil giant had been asked by the Ministry of Energy to boost its production capacity to 13 million barrels per day from the current 12mbpd.
Oil prices had climbed earlier in the day, recouping nearly half of Monday’s 25 per cent losses on hopes that spending cuts by North American producers to cope with multi-year low crude prices would lead to a drop in output.
Saudi has been pumping around 9.7mbpd in the past few months but has extra capacity it can turn on and has hundreds of millions of barrels of crude in storage.
Meanwhile, worries about the economic fallout from the coronavirus outbreak and its impact on energy demand continued to pressure oil prices.
Policymakers and central banks have been taking measures to bolster their economies against disruption caused by the virus outbreak, the latest being the Bank of England that unexpectedly cut interest rates by half a per cent on Wednesday.
“Coronavirus is still spreading globally and no doubts that the virus spread in major economies like the United States will continue to hurt oil demand,” said Victor Shum, vice president of Energy Consulting at IHS Markit.
“I think we are looking at $30 levels (in Brent) and I would not be surprised in some day to see prices lower than $30,” he added.
The flu-like coronavirus, which can be transmitted from person to person, originated in China late last year and has spread to more than 60 countries since then. It has infected over 100,000 people and killed more than 4,000 globally.
On Wednesday the U.S. Energy Information Administration (EIA) said that for the week ending March 6 inventories increased by 7.7 million barrels.