LONDON: Oil prices fell on Thursday, reversing earlier gains, following reports that Saudi Arabia, the world’s largest crude exporter, plans to abandon its price target in preparation for increasing output.
As of 1023 GMT, Brent crude futures dropped by $1.27, or 1.7%, to $72.19 per barrel, while U.S. West Texas Intermediate crude fell $1.18, also down 1.7%, to $68.51 per barrel. Both contracts had initially fallen by over $2 earlier in the day.
According to a report by the Financial Times, Saudi Arabia is set to move away from its unofficial price target of $100 a barrel as it prepares to boost production.
The Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, along with its allies including Russia (collectively known as OPEC+), have been cutting oil output to support prices.
However, oil prices have declined nearly 6% this year due to increased supply from other producers, particularly the United States, and weak demand growth in China.
Saxo Bank analyst Ole Hansen noted that “the prospect of additional supply from Libya and Saudi Arabia has been the main driver behind the latest weakness.”
In a positive development, a United Nations statement on Wednesday revealed that delegates from Libya’s eastern and western regions agreed on a process for appointing a central bank governor, which could help resolve disputes over the country’s oil revenue and restore exports.
Libya’s crude exports averaged about 400,000 barrels per day in September, a drop from over 1 million bpd in August.
Additionally, news of a new Chinese stimulus package helped to limit further losses. Chinese officials, acknowledging emerging economic challenges, pledged to implement “necessary fiscal spending” to achieve this year’s growth target of around 5%, raising expectations for more stimulus measures beyond those recently announced.
