Oil prices fell nearly 4% this Monday, due to the sharp price cuts of Saudi Arabia, main exporter, and increase in OPEC production, which countered supply concerns generated by escalating geopolitical tension in the Middle East.
The crude Brent fell 3.34%, to $76.12, while US crude oil futures West Texas Intermediate lost 4.11%, to $70.77
Both contracts rose more than one 2% in the first week of 2024 due to the intensification of geopolitical risk in the Middle East following attacks by the Yemeni Houthis on ships in the Red Sea.
On Sunday, increased supply and competition with rival producers led to Saudi Arabia to cut the February official selling price (OSP) of its flagship Arab Light crude to Asia to the lowest level in 27 months. “That is generatingor concerns about demand in China and also on global demand,” said Phil Flynn, analyst at Price Futures Group.
Oil: OPEC increased production
On Friday, a Reuters poll revealed that OPEC oil production rose in December, as increases from Iraq, Angola and Nigeria offset continued cuts from Saudi Arabia and other members of the broader OPEC+ alliance.
The increase occurred before new OPEC+ cuts in 2024 and Angola’s exit from OPEC, which are set to reduce January production and market share.
“If we focused only on the fundamental datasuch as rising inventories, increased OPEC/non-OPEC production and a lower-than-expected Saudi PSO, it would be impossible not to be bearish on crude,” said IG analyst Tony Sycamore.
Tension grows in the Middle East
“However, that does not take into account the fact that the geopolitical tensions in the Middle East are undeniably increasing again, which will mean a limited setback.
US Secretary of State Antony Blinken held further talks with Arab leaders on Monday as part of a diplomatic push to prevent the war in Gaza from spreading further. The conflict has already unleashed violence in the Israeli-occupied West Bank, Lebanon, Syria and Iraq, and has also led to Houthi attacks on sea routes of the Red Sea.
The drop in oil was attenuated by the force majeure declared on Sunday by la Libyan National Oil Corporation in its Sharara field, which can produce up to 300,000 barrels per day.
Source: Ambito
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