OIL PRICES: SAUDI CATS
Saudi Arabia, the world's largest oil exporter, deepened the discount at which it sells crude to Asia and the U.S., underscoring for some market watchers the kingdom's commitment to defending its market share amid the recent rout in oil prices.
The move comes a week after Riyadh persuaded fellow OPEC members to maintain the group's production target, instead of reining in output significantly to support prices.
Brent crude, the global benchmark, slid 0.4% to $69.64 a barrel on the news, reversing earlier gains. That's the lowest level since May 2010 and brings Brent's year-to-date decline to 37%. U.S. crude-oil prices dropped 0.8% to $66.81 a barrel, but remained above the more-than five-year low hit Nov. 28.
State-owned Saudi Aramco Oil Co., also known as Saudi Aramco, said Thursday that it had reduced its official selling prices for all oil grades bound for Asia in January by between $1.50 and $1.90 a barrel, compared with December. It dropped prices for all crude grades to the U.S. by between 10 cents and 90 cents a barrel.
Thursday's discounts to Asia "would herald in a new round in the battle for market shares," said Carsten Fritsch, an analyst at Commerzbank . He said the U.S. discounts were "tantamount to a declaration of war to U.S. shale oil producers," given the steep fall already in U.S. benchmark prices.
Aramco, however, raised prices for all crude grades to Northwest Europe and Mediterranean destinations by between 20 cents and 50 cents a barrel compared with the December prices.
Saudi Aramco sets its prices relative to regional benchmark crude-oil prices. It sells at different prices in different regions mainly to reconcile buyer demand with market fluctuations in those benchmarks. The price-setting process is typically a technical move with little impact on the broader market. But in recent months, amid a steep drop in global crude prices, the settings have been closely followed by market watchers looking for signs about Saudi oil policy.
Saudi Arabia, the biggest producer by far in the Organization of the Petroleum Exporting Countries, and its Gulf allies pushed the group at its Nov. 27 meeting to keep its production target unchanged. People familiar with the matter said Riyadh argued that the group would lose market share to non-OPEC producers, including U.S. shale-oil producers, if it cut output. Aramco also cut its U.S. pricing last month, a move executives familiar with the matter said at the time was aimed at holding on to market share.
The Wall Street Journal reported Wednesday that the kingdom now believes oil prices could stabilize at around $60 a barrel, a level both it and other Gulf producers believe they could withstand. The shift in Saudi thinking suggests the country won't push for supply cuts in the near term, even if oil prices fall further.
Kuwait's deputy finance minister, Khalifa Hamada, said at a local news conference on Thursday that the country was likely to base its 2014-2015 budget on an oil price of $55 to $60 a barrel.
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GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.