"Saudi Aramco announces that it received a directive from the ministry of energy to increase its maximum sustainable capacity from 12 million bpd to 13 million bpd," the company said in a statement to the Saudi Stock Exchange.
The decision comes a day after the world's top exporter, Saudi Arabia, decided to hike production by at least 2.5 million bpd to a record 12.3 million from April.
The Saudi moves come after the collapse of an oil production reduction agreement between OPEC and non-OPEC producers, including Russia.
The deal proposed by Saudi Arabia called for additional output cuts of 1.5 million bpd to cope with the severe economic impact of the coronavirus which has sharply reduced world demand for crude.
Boosting production capacity normally takes a long time and requires billions of dollars of investment.
Several years ago, the kingdom had shelved plans to boost its crude production capacity beyond 12 million bpd after demand for OPEC oil declined in the face of stiff competition from North American shale oil and other sources.
Russia said Tuesday it was open to renewing cooperation with the OPEC cartel even as its kingpin Saudi Arabia escalated a price war with Moscow by announcing it would flood markets with new supplies.
The oil price war broke out after OPEC and a group of non-member countries dominated by Russia -- the world's second largest producer -- on Friday failed to agree on production cuts.
Saudi Arabia responded by announcing unilateral price cuts. This prompted the oil price to plummet and fuelled huge falls on stock markets around the world on Monday.
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