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05-12-2014, 11:12 AM
Oil price dips on Saudi Arabia price cut
DOW JONES DECEMBER 05, 2014 8:06AM
THE global oil benchmark slid to a fresh more-than-four-year low after Saudi Arabia cut the price of its oil in the US, reinforcing concerns that the kingdom is more concerned with maintaining market share than raising prices.
Oil prices have slumped for months as global supply growth, particularly from the US, has outpaced demand. The Organisation of the Petroleum Exporting Countries, of which Saudi Arabia is the biggest producer, decided last week to keep its production quota steady. The cartel has lowered production to raise prices in the past, and its decision to maintain its output target sent prices tumbling.
State-run oil company Saudi Aramco lowered the January prices for its oil in the US by between US10c and US90c a barrel. The company also lowered its prices to Asia and raised them for Northwest Europe and the Mediterranean.
“The Saudis are making it very clear that they’re going to do whatever it takes to maintain market share,” Phil Flynn, analyst at the Price Futures Group in Chicago, said. “If it means taking prices to $US60 a barrel or $US50 a barrel, they’re prepared to do whatever it takes.”
Brent, the global benchmark, slid US28c, or 0.4 per cent, to $US69.64 a barrel on ICE Futures Europe, the lowest settlement since May 25, 2010.
US-traded light, sweet oil for January delivery fell US57c, or 0.9 per cent, to $US66.81 a barrel on the New York Mercantile Exchange.
Saudi Arabia now believes oil prices could stabilise at around $US60 a barrel, a level both it and other Gulf producers believe they could withstand, according to people familiar with the situation. That suggests the de facto OPEC leader won’t push for supply cuts in the near term, even if oil prices fall further.
Another Saudi price cut to the US is “tantamount to a declaration of war to US shale oil producers, in view of the significant decline in the price of the benchmark [US oil],” Commerzbank said in a note. “US shale oil producers already find themselves confronted with very low prices.”
US oil production has soared above 9 million barrels a day for the first time in decades due to new technologies enabling producers to access supplies trapped in shale oil fields. The US Energy Information Administration said yesterday that the country’s proven reserves of crude oil and condensate — the resources that are recoverable with current technology and prices — rose to 36.5 billion barrels in 2013, the highest level since 1974.
However, prices have fallen in recent months to levels that could threaten the viability of shale production. Some companies have already reduced capital expenditure plans for next year.
DOW JONES DECEMBER 05, 2014 8:06AM
THE global oil benchmark slid to a fresh more-than-four-year low after Saudi Arabia cut the price of its oil in the US, reinforcing concerns that the kingdom is more concerned with maintaining market share than raising prices.
Oil prices have slumped for months as global supply growth, particularly from the US, has outpaced demand. The Organisation of the Petroleum Exporting Countries, of which Saudi Arabia is the biggest producer, decided last week to keep its production quota steady. The cartel has lowered production to raise prices in the past, and its decision to maintain its output target sent prices tumbling.
State-run oil company Saudi Aramco lowered the January prices for its oil in the US by between US10c and US90c a barrel. The company also lowered its prices to Asia and raised them for Northwest Europe and the Mediterranean.
“The Saudis are making it very clear that they’re going to do whatever it takes to maintain market share,” Phil Flynn, analyst at the Price Futures Group in Chicago, said. “If it means taking prices to $US60 a barrel or $US50 a barrel, they’re prepared to do whatever it takes.”
Brent, the global benchmark, slid US28c, or 0.4 per cent, to $US69.64 a barrel on ICE Futures Europe, the lowest settlement since May 25, 2010.
US-traded light, sweet oil for January delivery fell US57c, or 0.9 per cent, to $US66.81 a barrel on the New York Mercantile Exchange.
Saudi Arabia now believes oil prices could stabilise at around $US60 a barrel, a level both it and other Gulf producers believe they could withstand, according to people familiar with the situation. That suggests the de facto OPEC leader won’t push for supply cuts in the near term, even if oil prices fall further.
Another Saudi price cut to the US is “tantamount to a declaration of war to US shale oil producers, in view of the significant decline in the price of the benchmark [US oil],” Commerzbank said in a note. “US shale oil producers already find themselves confronted with very low prices.”
US oil production has soared above 9 million barrels a day for the first time in decades due to new technologies enabling producers to access supplies trapped in shale oil fields. The US Energy Information Administration said yesterday that the country’s proven reserves of crude oil and condensate — the resources that are recoverable with current technology and prices — rose to 36.5 billion barrels in 2013, the highest level since 1974.
However, prices have fallen in recent months to levels that could threaten the viability of shale production. Some companies have already reduced capital expenditure plans for next year.
