By Nicole Friedman And Summer Said
The global oil benchmark slid to a fresh more-than-four-year low
Thursday after Saudi Arabia cut the price of its oil in the U.S.,
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 U.S., has outpaced demand. The Organization
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 on Thursday lowered the
January prices for its oil in the U.S. by between 10 and 90 cents 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," said Phil Flynn,
analyst at the Price Futures Group in Chicago. "If it means taking
prices to $60 a barrel or $50 a barrel, they're prepared to do
whatever it takes."
Brent, the global benchmark, slid 28 cents, or 0.4%, to $69.64 a
barrel on ICE Futures Europe, the lowest settlement since May 25,
2010.
U.S.-traded light, sweet oil for January delivery fell 57 cents,
or 0.9%, to $66.81 a barrel on the New York Mercantile
Exchange.
Saudi Arabia now believes oil prices could stabilize at around
$60 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 U.S. is "tantamount to a
declaration of war to U.S. shale-oil producers, in view of the
significant decline in the price of the benchmark [U.S. oil]," said
Commerzbank in a note. "U.S. shale-oil producers already find
themselves confronted with very low prices."
U.S. 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 U.S.
Energy Information Administration said Thursday 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.
January reformulated gasoline blendstock, or RBOB, fell 1.22
cents, or 0.7%, to $1.7948 a gallon, the lowest level since Oct. 9,
2009.
January diesel fell 1.57 cents, or 0.7%, to $2.1177 a gallon,
the lowest settlement since Sept. 23, 2010.
Write to Nicole Friedman at nicole.friedman@wsj.com and Summer
Said at summer.said@wsj.com
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