Saudis Cuts U.S. Price, Oil Sags to $82

Maritime Activity Reports, Inc.

November 4, 2014

Saudi Arabia cuts oil prices for U.S. customers; Brent and WTI touch respective 4-year and 3-year lows.

Brent crude oil fell more than 3 percent to its lowest in over four years near $82 a barrel on Tuesday, after top oil exporter Saudi Arabia cut sales prices to the United States.

Front-month Brent touched a low of $82.08, its weakest since October 2010, and was down $2.60 at $82.18 a barrel by 1305 GMT.

U.S. light crude was down $2.40 at $76.38 a barrel. It touched a session low of $75.84, its weakest since October 2011, as its discount to Brent hovered around $6.

Top global exporter Saudi Arabia increased its December official selling prices (OSPs), relative to benchmarks, to Asia and Europe on Monday, but lowered prices to the United States, a smaller export market.

"This is mixed news, and the fact that the positive angle has not made an impact shows that market sentiment is very negative at the moment," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

Daniel Ang of Phillip Futures said in a note that the move "signalled Saudi Arabia's intention to fight for U.S. market share and could even show its intention to squeeze U.S. shale producers".

But analysts at JBC Energy said the pricing reflected market fundamentals and did not have a political motive.

"We would strongly advocate against interpreting every month's OSP publication in the context of 'price war' and 'market share battle' stories," they said in a note.


A growing supply glut in the United States has led more than a dozen oil producers to create a new lobby group, Producers for American Crude Oil Exports (PACE), which seeks to end the country's 40-year ban on crude exports.

U.S. commercial crude stocks are likely to have risen last week, according to a survey by Reuters, which if confirmed will be the fifth consecutive weekly stock build.

Industry group the American Petroleum Institute will release its inventory data at 2130 GMT, and the Energy Information Administration will release official figures on Wednesday.

U.S. crude futures slipped into contango on Monday for the first time since January. A contango structure indicates that front-month prices are lower than prices further forward.

"Contango makes a structure unattractive for re-investors because they make a loss when each month rolls over," said Tamas Varga, analyst at PVM Oil in London.

The absence of signs that the Organization of the Petroleum Exporting Countries (OPEC) could curb output at its Nov. 27 meeting also weighed on prices.

Members Venezuela and Ecuador are working on a joint proposal to defend oil prices, but the United Arab Emirates oil minister said the country is "not panicking".

"The market sentiment will stay negative until OPEC appears to be unified," said Commerzbank's Weinberg. "Everybody is blaming each other but nobody is willing to cut."

Ian Taylor, chief executive of trading house Vitol, disagreed.

"My feeling is we're underestimating now the possibility of OPEC cutting," he said at the Reuters Global Commodities Summit.

Saudi Arabia's oil minister arrived on Tuesday in Venezuela, where he will meet Venezuela's foreign minister on Wednesday, according to a person close to the Saudi delegation.

Foreign Minister Rafael Ramirez is a former energy minister and remains in charge of Venezuela's OPEC delegation.

By Sam Wilkin

Maritime Reporter E-News subscription

Maritime Reporter E-News is the maritime industry's largest circulation and most authoritative ENews Service, delivered to your Email five times per week

Subscribe for Maritime Reporter E-News