Crude oil prices continued to fall earlier today, extending a two-day losing streak as negative news overshadowed any positive developments.
Earlier this week, it was reported that rival factions in Libya had reached an agreement on appointing a new central bank governor. This development indicated that oil production and exports in the region would soon stabilize, easing worries about supply shortages.
However, the latest setback for oil prices came from Saudi Arabia. On Thursday, the Financial Times reported, citing anonymous sources, that the kingdom is considering abandoning its $100 per barrel price target. Instead, it may focus on recovering lost market share by increasing supply. Although this price target is not officially stated, it aligns with the International Monetary Fund’s assessment earlier this year, which indicated that Saudi Arabia needed oil prices at this level to balance its budget. This budget balance is essential for funding the ambitious projects led by Crown Prince Mohammed bin Salman to diversify the economy away from oil dependency.
The report from the Financial Times suggested that Saudi leaders are shifting their priorities and are prepared for lower oil prices for an extended period.
This Saudi announcement had a compounded effect when Russia’s Deputy Prime Minister Alexander Novak stated that Russia plans to adhere to its OPEC+ commitments. This means Russia will begin restoring some oil supply in December, similar to Saudi Arabia. Novak also confirmed that the OPEC+ alliance is not discussing any changes to its current oil production strategy, which involves increasing supply starting in December. This indicates that other member countries are also preparing for lower prices and are prioritizing market share.
“The significant issues on the market’s radar this week have been Libya and OPEC+,” stated FGE Energy, as reported by Reuters. Brent crude oil prices are expected to close the week nearly 5% lower than they started, while West Texas Intermediate is projected to record a loss of over 6%.
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