A derek pumps in a oil field January 15, 2003 near the Saudi Arabian border, Kuwait. (Photo by Joe Raedle/Getty Images)
Russia said Tuesday it was open to renewing cooperation with the OPEC oil cartel even as kingpin Saudi Arabia escalated a price war with Moscow by announcing it would flood markets with new supplies.

The oil price conflict broke out after OPEC and a group of non-member countries dominated by Russia — the world’s second largest oil producer — on Friday failed to agree on production cuts.

Saudi Arabia, the world’s biggest crude exporter, responded by announcing unilateral price cuts. This prompted the oil price to plummet and fuelled huge drops on stock markets Monday.

On Tuesday, Saudi oil giant Aramco announced a plan to massively increase oil output despite falling demand during the novel coronavirus outbreak.

Russian Energy Minster Alexander Novak said Tuesday that Moscow remains open to cooperation with OPEC to stabilise the oil market.

“I want to say the doors aren’t closed,” Novak told the state-run Rossiya 24 television channel, hinting at the possibility of further talks.

Russia’s failure to reach agreement with the cartel “does not mean that in the future we can’t cooperate with OPEC and non-OPEC countries,” Novak insisted.

Kremlin spokesman Dmitry Peskov told journalists: “No one rules out such a possibility.”

Aramco said Tuesday it would boost crude oil supplies to 12.3 million barrels per day in April in a move that will flood markets when current agreements expire.

The announcement “shows the Saudis have something to prove,” director of Britain-based RS Energy Bill Farren-Price said. “This is a grab for market share.”

Novak in turn said Russia could also swiftly increase its production.

“I think in the short-term we can increase by 200-300,000 barrels (per day) with the prospect of 500,000 barrels, that’s in the near future.”

“If necessary we have various tools including reduction and increasing production,” Novak said, adding that a meeting of OPEC and non-member producers was planned for May or June.

The dispute broke out after Russia on Friday refused to agree to a proposal by OPEC ministers led by Saudi Arabia for a drastic cut of 1.5 million barrels per day involving OPEC and non-member producer countries including Russia.

Russian oil companies had opposed such cuts, fearing loss of market share and of competitiveness against US shale production.

They had previously in December agreed on a milder production cut of 500,000 barrels in 2020 and Russia wanted this to continue.

Saudi Arabia responded on Sunday to the collapse of their proposed cuts with its biggest price cut in 20 years in a bid to win market share.

Oil prices plunged by almost a third Monday, their biggest one-day move since the 1991 Gulf War.

“At first glance, this looks like a battle between Russia and Saudi over oil policy,” said Chris Weafer of Macro Advisory consultancy.

“But the context of the relentless rise in US oil production over the past ten years is also an important factor.”

Both Russia and major OPEC producers have been “openly annoyed” with US producers’ refusal to participate in past production cuts, he added.

“All oil producers will of course share the pain of a lower oil price,” said SEB analyst Bjarne Schieldrop.

“But it is US shale oil producers who will have to step back and lower production.”

On Monday the crash in oil prices and fears over the global economic impact of the virus outbreak prompted a meltdown on stock markets.

Global stocks and oil prices rebounded on Tuesday, however.

Benchmark oil contracts WTI and Brent were both around seven percent higher on the day in the European afternoon, having earlier spiked by over 10 percent, but failed to recoup the previous day’s losses.

Russia’s stock exchanges plunged more than 10 percent Tuesday when traders returned from a long holiday weekend, before rallying slightly.

The ruble, which had fallen against the dollar and euro on Monday to levels last seen in early 2016, strengthened slightly.