Oil Prices
On Monday, oil prices experienced a significant drop of over 2%, driven by Saudi Arabia’s substantial price reductions and an increase in OPEC output. This downturn offset concerns about supply disruptions arising from escalating geopolitical tensions in the Middle East. Brent crude declined by 2.2%, or $1.74, reaching $77.02 per barrel by 1024 GMT, while US West Texas Intermediate crude futures saw a 2.3% decrease, or $1.73, settling at $72.08.
Despite both contracts having risen more than 2% in the first week of 2024 due to heightened geopolitical risks in the Middle East—stemming from attacks by Yemeni Houthis on Red Sea ships—Saudi Arabia’s unexpected price cuts on Sunday and increased OPEC output prompted the decline.
The kingdom lowered the February official selling price (OSP) of its flagship Arab Light crude to Asia, reaching the lowest level in 27 months. Analysts speculated that this move aimed not only at managing non-OPEC supply interference but also at addressing concerns within its own cartel membership.
A recent Reuters survey indicated a rise in OPEC oil output in December, with increases in Iraq, Angola, and Nigeria offsetting cuts by Saudi Arabia and other OPEC+ members. The geopolitical tensions in the Middle East, particularly Red Sea concerns, provided some support to crude prices amid expectations of softening global demand and rising inventories.
US Secretary of State Antony Blinken engaged in diplomatic talks with Arab leaders on Monday, attempting to prevent the Gaza conflict from spreading further. Geopolitical tensions in the region, coupled with intermittent Red Sea disruptions, acted as a weak counterbalance to bearish market sentiment.
Additionally, a force majeure declared by Libya’s National Oil Corporation on Sunday at the Sharara oilfield, capable of producing up to 300,000 barrels per day, added to the factors supporting oil prices.
