SINGAPORE (Reuters) – Oil prices fell on Thursday, reversing earlier gains, following reports that Saudi Arabia plans to abandon its crude oil price target. This move comes as the kingdom prepares to increase its oil production.
Brent crude futures dropped 55 cents, or 0.75%, to $72.91 a barrel. U.S. West Texas Intermediate crude also fell by 55 cents, or 0.79%, to $69.14 per barrel as of 0502 GMT.
According to the Financial Times, Saudi Arabia is set to give up its unofficial target of $100 a barrel for crude oil, based on insights from sources familiar with the situation.
Earlier in the session, oil prices had risen due to signs of increased fuel demand and declining inventories in the U.S., the world’s largest oil consumer. However, concerns about global demand, particularly in China, remained a significant factor.
Tony Sycamore, a market analyst at IG, stated, “Regarding China, in addition to this week’s easing measures, fiscal stimulus may be necessary to boost household consumption and revive market confidence.”
Further pressure on oil prices came from the prospect of Libyan oil returning to the market. Delegates from Libya’s eastern and western regions agreed on appointing a central bank governor, which could help resolve the ongoing crisis over oil revenue and restore exports.
Despite the positive data on U.S. demand, which showed larger-than-expected declines in oil inventories, the market remained cautious. ANZ Research noted that any revival in Libyan production would enter a market already grappling with weak demand concerns from both the U.S. and China.
Still, the latest Energy Information Administration (EIA) report indicated that U.S. gasoline demand surged to over 9 million barrels per day last week, while distillate fuel supplies increased to more than 4 million barrels per day.
Looking ahead, Sycamore anticipates that market focus will shift to month-end positioning. “Next week, all eyes will be on the nonfarm payrolls report,” he said, especially after recent consumer confidence data showed a significant decline.
The U.S. consumer confidence index fell the most in three years this September, highlighting growing concerns about the labor market. The nonfarm payrolls report is scheduled for release on October 4.
In geopolitical news, the U.S., France, and other allies have called for an immediate 21-day ceasefire along the Israel-Lebanon border and expressed support for a ceasefire in Gaza. This comes amid rising tensions, as Israel expanded its airstrikes in Lebanon, resulting in at least 72 fatalities, according to the Lebanese health ministry.
Israel’s military chief indicated that a ground assault could be on the horizon, raising fears of a broader conflict in this vital oil-producing region.
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