Brent crude slid Thursday to the lowest level in more than four years and West Texas Intermediate also
Saudi Arabia’s state-run oil company will offer the deepest discounts for its benchmark crude to Asian buyers in at least 14 years. The country has no price target for oil, according to a person familiar with its oil policy. The Saudis don’t want to subsidize Iran, Venezuela and Iraq and are willing to let the market decide prices, Daniel Yergin, vice chairman of consultant IHS Inc., told Bloomberg TV.
“Sentiment is certainly more bearish,” said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Mass. “We’re going to drift lower until there’s a serious improvement in the economy, a disruption in supply or an OPEC member actually does something instead of saying that someone else should take action.”
Both benchmarks fell 18 percent last month as OPEC maintained its output target, letting prices fall to a level that may slow U.S. production growth. Kuwait’s oil minister said the group is acting to preserve market share amid a global supply glut, after resisting calls from members including Venezuela to cut production at a Nov. 27 meeting in Vienna.
Brent for January settlement slid 28 cents, or 0.4 percent, to $69.64 a barrel on the London-based ICE Futures Europe exchange, the lowest close since May 2010. Volume was 9.6 percent below the 100-day average. The European benchmark crude traded at a premium of $2.83 to WTI on the ICE.
WTI for January delivery dropped 57 cents, or 0.9 percent, to end at $66.81 a barrel on the New York Mercantile Exchange. Volume was about 26 percent below the 100-day average for the time of day. Prices have declined 32 percent this year.
“It’s basically a new game in world oil,” said Yergin. “The Saudis have almost $800 billion in foreign exchange reserves, so they can wait this out.”
Saudi Arabian Oil Co., the state-run oil company, lowered the official selling price for Arab Light to Asia next month to a discount of $2 against the regional benchmark, according to an e-mail from the company today. That’s the biggest discount in data compiled by Bloomberg since June 2000. The world’s largest oil exporter also cut prices for all grades it sells to U.S. refineries.
“They’re keeping their crude competitive,” said Mike Wittner, the head of oil research at Societe Generale SA in New York. “This is their policy.”
Saudi Arabia has no target for crude prices and will let the market decide at what level oil should trade for now, said the person who asked not to be identified. The comment echoes those made by Oil Minister Ali Al-Naimi, who said Nov. 26 that the oil market will “stabilize itself.” OPEC decided the next day not to cut its oil-output limits, triggering the biggest one-day drop in futures in more than three years.
“The Saudis will not mind oil prices going down to $60 to take out the growth in U.S. shale production,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “They want to maintain their market share.”
OPEC pumped 30.56 million barrels a day in November, exceeding its official target for a sixth straight month, according to a separate Bloomberg survey of oil companies, producers and analysts. The 12-member group, responsible for about 40 percent of the world’s supply, is scheduled to meet again on June 5.
U.S. crude production increased to 9.08 million barrels a day in the week ended Nov. 28, the highest since Energy Information Administration weekly data started in 1983.
About 80 percent of shale production in the U.S. will be profitable in 2015 with oil between $50 and $70, Yergin said.
The combination of horizontal drilling and hydraulic fracturing has unlocked supplies from shale formations in the central U.S., including the Bakken in North Dakota and the Eagle Ford in Texas.
Also Thursday, natural gas futures declined for the fifth straight day in New York after a government report showed a smaller-than-forecast drop in U.S. inventories.
Natural gas for January delivery slid 15.6 cents, or 4.1 percent, to $3.649 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Oct. 28.
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