DTN Oil
ICE Brent Falls to $76 After Saudi Aramco Sharply Cut OSPs
WASHINGTON (DTN) -- New York Mercantile Exchange West Texas Intermediate futures and Brent crude traded on the Intercontinental Exchange settled Monday's session with losses between 3% and 4% after Saudi Aramco sharply reduced official selling prices for its crude oil for February delivery across all markets, pressured by weak demand fundamentals in the global physical oil market.
State-owned oil giant Saudi Aramco cut its February oil prices to Asian markets by $2 to the lowest level in 13 months at $1.50 bbl over Oman/Dubai quotes, according to a company statement. For European customers, Aramco cut its February Arab Light OSP by $2 bbl to $0.90 bbl above ICE Brent. Arab Light to the United States was lowered by $2 bbl to $5.15 bbl versus ASCI in February.
The price cuts were larger than analysts forecasted and were realized as refiners called for competitive prices from Saudi Arabia, which were at a premium compared to crude oil supplied from other Middle Eastern producers and cargoes from the Atlantic Basin.
The move is also seen as an attempt to regain lost market share amidst steep production cuts implemented by OPEC+. Since July 2023, Saudi Arabia has continued to voluntarily cut oil production by 1 million bpd above its OPEC+ quota, having announced on Nov. 30 an extension of the lower output rate through the first quarter.
Limiting downside for the oil complex are ongoing concerns over geopolitical risk in the Middle East after a series of deadly attacks in Iran, Lebanon, Syria, and Iraq. The Iraqi government late last week said that it has begun the process of removing the U.S.-led international military coalition stationed in the country since 2004, according to a statement released by the office of Prime Minister Mohammed Shia al-Sudani. The move could further destabilize the volatile region that has been rocked by the Israel-Hamas war and attacks on commercial shipping in the Red Sea by the Houthi militia.
Additionally, a supply disruption at Libya's largest oil field, El Sharara, last week caused by antigovernment protests halted operations across the Murzuq Basin. As of Monday morning, the protests in response to high fuel prices and lack of economic opportunity in southern Libya continued to keep the 300,000 bpd El Sharara and 70,000 bpd El Feel oil fields shut in. It is unclear when operations can resume. Both oil fields have been frequently targeted by protesters and rival militias since the downfall of Moammar Qadhafi in 2011.
At settlement, February WTI futures on NYMEX declined $3.04 to $70.77 bbl, and the international crude benchmark Brent contract for March delivery dropped $2.64 bbl to $76.12 bbl. NYMEX February ULSD futures fell $0.0316 to $2.5769 gallon, while NYMEX February RBOB futures shed $0.0777 for a $2.0278 gallon settlement.
Liubov Georges can be reached at Liubov.Georges@dtn.com