Oil Heads For 4-year Low On Saudi Output Signal - Gulf Business
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Oil Heads For 4-year Low On Saudi Output Signal

Oil Heads For 4-year Low On Saudi Output Signal

Kuwait’s oil minister said on Sunday OPEC was unlikely to cut production to support prices.


Brent crude oil fell below $88 a barrel on Monday, its lowest in almost four years, after key Middle East producers signalled they would keep output high to defend market share even if that meant lower prices.

Saudi Arabia has privately told oil market participants it can accept oil prices between $80 and $90 a barrel, sources briefed by OPEC’s biggest producer have told Reuters.

Kuwait’s oil minister said on Sunday OPEC was unlikely to cut production to support prices.

“In light of these comments, one should not expect any OPEC output cuts before the Nov. 27 meeting,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.

The Organization of the Petroleum Exporting countries is due to discuss output at next month’s meeting, and some analysts had expected the group to reduce oil supply before then.

Brent crude touched its lowest since December 2010 at $87.74 in early trade on Monday, but recovered slightly to around $88.10 a barrel by 0830 GMT, down $2.11 on the day. U.S. crude was down $1.60 at $84.22.

Growth in China’s exports and imports trumped forecasts in September, and the world’s largest energy consumer increased crude oil imports by 9.5 percent from August, lending limited support to prices.

China often increases imports to bolster its reserves when prices are low, and real demand growth is likely to be more modest.

The outlook in Europe remained gloomy as rating agency Standard and Poor’s lowered its outlook on France to negative from stable on Friday. European stocks fell in early trading on Monday.

According to chart analysts, oil prices could be on the brink of sliding another $10 or more. They say a drop of over 20 percent since June has wiped out key support levels and left behind a “technical graveyard”.

“If Brent closes below $88.49, I’m pretty certain that further downward pressure can be expected until the next significant level at $82.35,” said Tamas Varga, an analyst at brokerage PVM Oil Associates in London.

Saudi Arabia reported September production of 9.704 million barrels per day (bpd), up from 9.597 million in August, according to a monthly OPEC report issued on Friday.

The lack of a Saudi oil production cut reinforced the view of traders and analysts that the kingdom is looking to defend market share, not prices.

Kuwait’s oil minister, Ali al-Omair, was quoted as saying by state news agency KUNA on Sunday that $76 to $77 a barrel might be the level that would end the oil price slide, since that was the cost of oil production in the United States and Russia.

The rapid increase in U.S. shale output over the past year could change market dynamics permanently, SEB’s Schieldrop said.

“$100 is no longer the ideal market price,” he said. “It’s good for producers but too high for consumers, leading to oversupply.”

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