Oil prices plunged on Tuesday, with Brent hitting a four-year low after Saudi Arabia slashed its export prices for the US market to counter demand for shale fuels.
Brent North Sea crude for delivery in December slumped $2.38 to stand at $82.40 a barrel in London midday deals. It had earlier hit a four-year low point at $82.02.
US benchmark West Texas Intermediate for December slid $2.31 to $76.49 a barrel compared with Monday’s closing level. Earlier Tuesday, WTI hit a three-year low at $75.84.
Prices had already begun falling heavily on Monday “after it was reported that Saudi Arabia cut its selling price to the US possibly in a bid to compete with US shale oil”, United Overseas Bank said in a note to clients.
Riyadh had lowered its December prices for oil shipped to the United States, where its market share has been hit hard by the rise in domestic production of oil and gas extracted from shale rock.
Saudi Arabia raised the prices for its oil in other locations, including Asia, where the country has cut its prices for four straight months, Dow Jones Newswires reported.
Daniel Ang, investment analyst at Phillip Futures in Singapore, said the price cut “clearly reiterates the fragile nature of the crude market now as major players try to survive in this oversupplied market”.
“We expect Iraq and Iran to follow suit shortly in the coming weeks and that could very well spark another sell-off,” he said.
The move by Saudi Arabia comes ahead of a key production meeting of the Organization of the Petroleum Exporting Countries (OPEC) on November 27 in Vienna.
The cartel, comprising 12 oil producing countries including kingpin Saudi Arabia, is expected to deliberate on whether to trim its current output of about 30 million barrels per day to prop up prices.
Saudi Arabia, long the world’s key producer, has wrestled with its options of cutting output to shore up prices or reduce them to defend its market share. (AFP)