NEW YORK: Oil dived more than 3 percent yesterday to multi-year lows, as Saudi Arabia’s sharp cut in export prices to the United States looked likely to deepen a global supply glut that has already driven prices down 30 percent since June.
On Monday, Saudi Arabia surprised the market by raising prices for Asia and Europe but cutting prices for US customers. Oil slid as much as $2 a barrel in late trade, and the sell-off continued yesterday, triggering technical sell-stops. “The Saudis have basically declared war on the US oil producers,” said Phil Flynn at Price Futures Group. “I think they believe that the only way they’re going to survive in the long term is to break the market in the short term.”
US crude futures were down $2.33 at $76.45 after reaching the lowest price since October 2011. Many analysts say the US shale boom could slow if crude stays below $80 a barrel. The price of Brent for next-month delivery was down $2.22 at $82.56 by 1701 GMT after touching its lowest point since October 2010.
On Monday, longer-dated oil futures became more expensive than near-term contracts, putting charts into a contango structure for the first time since January 17. Yesterday, the Dec/Jan spread was around minus 8.
US commercial crude stocks are likely to have risen last week in the fifth straight weekly stock build, according to a survey.
The Organisation of the Petroleum Exporting Countries (OPEC) could curb output meets November 27, but there are no clear signs that Opec will curb output. Most core Gulf members have indicated little alarm over the price drop.
The United Arab Emirates oil minister said the country is “not panicking”. Venezuela and Ecuador have said they are working on a joint proposal to defend oil prices.
“I can see Opec and Saudi Arabia playing the long game. A low price for a period of time may actually play into the hands of people with a lot of reserves in the ground at cheap cost,” Pierre Lorinet, chief financial officer of Trafigura, said at the Reuters Global Commodities Summit.
Ian Taylor, chief executive of Vitol, said at the summit that Opec members would have
“serious discussions” about an output cut. Reuters
