By John Ikani
Oil prices tumbled by more than 3% on Thursday, driven by reports suggesting that Saudi Arabia, the world’s leading crude exporter, might abandon its price target and increase output.
In addition, OPEC+ seemed poised to raise production in December.
Brent crude futures dipped by $2.26, or 3.1%, to $71.20 a barrel, while U.S. West Texas Intermediate crude fell by $2.31, or 3.3%, to $67.38 per barrel.
The Financial Times reported that Saudi Arabia was preparing to abandon its unofficial price target of $100 a barrel for crude as it prepared to ramp up production.
Meanwhile, two OPEC+ sources indicated that the producer group was set to proceed with a December oil output increase, as its impact would be minimal if some members implemented larger cuts to compensate for overproduction.
The Saudi government’s communications office and OPEC did not immediately respond to requests for comment.
The Organization of the Petroleum Exporting Countries, along with its allies, including Russia, collectively known as OPEC+, has been reducing oil output to bolster prices.
However, prices have declined by nearly 6% so far this year, amid increased supply from other producers, particularly the U.S., and weak demand growth in China.
Ole Hansen, an analyst at Saxo Bank, attributed the recent price weakness primarily to the prospect of additional supply from Libya and Saudi Arabia.
A United Nations statement on Wednesday announced that delegates from Libya’s divided east and west regions had agreed on the process of appointing a central bank governor, a step that could potentially resolve the crisis over control of the country’s oil revenue, which has disrupted exports.
Libya’s crude exports have averaged around 400,000 barrels per day (bpd) in September, significantly lower than the more than 1 million bpd exported in August, according to shipping data.
However, news of a new Chinese stimulus package helped limit further losses.
Top government officials in China, the world’s largest crude oil importer, pledged to implement “necessary fiscal spending” to achieve this year’s economic growth target of roughly 5%, acknowledging new challenges and raising market expectations for additional stimulus measures.
