US benchmark West Texas Intermediate (WTI) for January delivery tumbled 44 cents to $66.37 a barrel in afternoon trade and Brent crude for January dropped 49 cents to $69.15.
“Saudi Arabia has just cut the price of the oil it sells to Asia and the US and this is going to have a big effect on the market today and early next week,” said Daniel Ang, an investment analyst at Phillip Futures in Singapore.
Saudi Aramco, the kingdom’s state-owned oil company, said Thursday it had slashed its official selling price for Arab light grade oil bound for Asia in January by $1.90 a barrel from December’s level.
It also reduced the price of Arab light grade oil bound for the United States by 70 cents.
“They’re definitely fighting for market share,” Ang told AFP.
Saudi Arabia is the biggest and most influential member of the Organization of the Petroleum Exporting Countries (OPEC), which late last month decided to maintain output levels despite a global oversupply.
OPEC’s decision at its November 27 meeting in Vienna sent oil prices tumbling to their lowest point in five years.
Singapore’s United Overseas Bank said Saudi Arabia’s move was “reinforcing concerns that the world’s leading exporter is now more focused on defending its market share than increasing price”.
“Saudi reportedly believes oil prices could stabilise at $60 a barrel and there is also rife speculation that Saudi is also trying to drive high-price producers out of the market,” it said in a market commentary.
But French bank Credit Agricole said lower prices should give emerging markets a boost.
“Oil-intensive economies, including the bulk of Asia, would benefit from lower inflation, larger monetary leeway to support the recovery, and lower corporate and household costs,” it said.
“Against such a backdrop this could support a scenario of a slight recovery in emerging market GDP growth in 2015.” (AFP)