On Monday morning, crude oil prices experienced a downturn following Saudi Arabia’s announcement of significant price cuts over the weekend.
Brent crude witnessed a drop of up to 1.5%, reaching US$77.69 per barrel, while West Texas Intermediate crude decreased by as much as 1.9%, standing at US$72.53.
These declines equated to reductions of approximately US$1.40 and US$1.16 per barrel respectively as the markets commenced trading on Monday.
Saudi Aramco, the state-owned oil company, revealed price cuts of up to US$2 per barrel from February, relative to regional benchmarks, on Sunday. This move, combined with an increase in supply from the Organization of the Petroleum Exporting Countries (OPEC), contributed to the curbing of prices.
The Saudi reductions are expected to be implemented globally, including a 2% cut compared to the Oman and Dubai benchmark levels of January, and against the ASCI index for the Gulf Coast.
For the Mediterranean and northern European regions, prices are set to decrease by US$1.50 to US$2 per barrel, in comparison to the ICE Brent crude benchmark’s figures from January.
IG analyst Tony Sycamore expressed a bearish outlook on crude oil, citing factors like higher inventories and production. However, he also pointed out that the escalating geopolitical tensions in the Middle East could limit the downside in oil prices.
Susannah Streeter, an analyst at Hargreaves Lansdown, noted that the announcement on Sunday was driven by concerns over weakening global demand for oil.
She mentioned that while prices had been volatile due to conflicts in the Middle East, the current focus is on the global reduction in oil demand.
