Oil & Gas Riyadh’s price cut fails to halt drop in oil markets By Eva Levesque January 9, 2024, 4:26 AM Reuters/Maxim Shemetov A Saudi Aramco worker at its oil facility in Abqaiq. Arab Light crude will cost $2 less per barrel in February Official price to Asia cut Lowest in 27 months Brent crude down 2% Saudi Arabia’s decision to cut its February oil price is a response to rising supply and competitive pressures in the market, industry analysts have told AGBI. The country, the world’s biggest crude oil exporter, is reducing the official selling price to Asia of its flagship Arab Light crude to the lowest level in 27 months. The February price will be $2 a barrel lower than in January. Oil prices dipped by more than 2 percent on Monday in response to the Saudi cut and the increase in supply, offsetting concerns about escalating geopolitical tensions in the Middle East. Brent crude fell 2.62 percent to $76.70 a barrel, while US West Texas Intermediate crude lost 2.9 percent to $71.69 a barrel. Opinion: Economics, not geopolitics, will define oil prices Opec set for tricky year as US booms and demand slows Angola’s Opec exit points to growing divisions “Saudis are worried about global demand,” said Matt Stanley, energy expert at Kpler. The kingdom has about half a million barrels a day of crude available and its big refinery is down for maintenance until March so it needs to shift barrels, Stanley said. Vijay Valecha, chief investment officer at Century Financial in Dubai, attributed the cut in the price of Arab Light to weaker demand and increased competition from rival producers, notably the greater availability of affordable crude from Russia and Iran. Crude oil posted an annual loss last year despite Opec+ output cuts, as supply from non-Opec producers increased. China, the top importer, reduced its demand as a result of slower economic growth. Opec supply has also increased. The UAE was allowed to increase its production by 300,000 barrels a day, Stanley pointed out. Experts said high interest rates, the US government’s replenishment of its strategic petroleum reserve and weak global economic activity would trigger higher volatility in markets. The attacks by Houthi rebels on Red Sea shipping interrupted the seven-week downtrend in oil prices, Valecha said. However, he believed the outlook for oil prices appeared bearish. Fighting is also continuing in Gaza. The US Secretary of State, Antony Blinken, who is visiting the Middle East this week, has called for a concerted peace effort to prevent unrest spreading across the region. “The market is going to be pressured,” said Kpler’s Stanley, who predicted that prices could fall below $70-$75 per barrel in the short term. “If there were no worries about what’s happening in the Red Sea, I think prices would easily be in the mid-$60s – maybe $10 a barrel lower,” he said. “That’s the big issue the Saudis are looking at.”
