Oil prices slide on prospect of Saudi Arabia raising output

Oil prices slipped on Thursday, reversing earlier gains, on a media report that Saudi Arabia, the world’s top crude exporter, will give up its price target in preparation for raising output.

Brent crude futures were down $1.62, or 2.2 per cent, to $71.84 a barrel, while US West Texas Intermediate crude fell $1.6, or 2.3 per cent, to $68.09 per barrel. Both contracts fell more than $2 a barrel earlier on Thursday.

Saudi Arabia is preparing to abandon its unofficial price target of $100 a barrel for crude as it prepares to increase output, the Financial Times reported on Thursday, citing people familiar with the matter.

The Saudi government’s communications office did not immediately return a request for comment.

The Organization of the Petroleum Exporting Countries along with the group’s allies including Russia, together known as OPEC+, have been cutting oil output to support prices.

Oil prices and a tough year

However, prices are down nearly 6 per cent so far this year, amid increasing supply from other producers, especially the United States, as well as weak demand growth in China.

“The prospect of additional supply from Libya and Saudi Arabia has been the main driver behind the latest weakness,” Saxo Bank analyst Ole Hansen said.

A United Nations statement on Wednesday said delegates from divided Libya’s east and west agreed on the process of appointing a central bank governor, a step which could help resolve the crisis over control of the country’s oil revenue that has disrupted exports.

Libya’s crude exports have averaged about 400,000 barrels per day (bpd) in September, down from over 1 million bpd in August, shipping data show.

News of a new Chinese stimulus package limited further losses, however.

Top government officials in China, the world’s largest crude oil importer, pledged on Thursday to deploy “necessary fiscal spending” to meet this year’s economic growth target of roughly 5 per cent, acknowledging new problems and raising market expectations for fresh stimulus in addition to measures announced this week.