Main information
- Oil prices fell on Thursday after reports that Saudi Arabia plans to increase production.
- Brent crude futures fell to $71.45 a barrel.
- A new Chinese stimulus package helped limit losses despite weak demand growth in China.
Oil prices fell Thursday, reversing earlier gains, following reports that Saudi Arabia intends to increase production. Brent crude futures fell to $71.45 a barrel, while West Texas Intermediate crude fell to $68.10 a barrel at the time of publication. Both contracts had initially lost more than $2 a barrel earlier in the day.
Saudi Arabia is preparing to abandon its unofficial $100-a-barrel price target as it prepares to raise output, according to a report in the Financial Times citing informed sources. The Riyadh-led Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, collectively known as OPEC+, have implemented production cuts to support prices.
Oil Market Dynamics
Despite these efforts, prices have fallen by nearly 6 percent this year due to increased supply from other producers, notably the United States, and weak demand growth in China. Expected increases in supply from Libya and Saudi Arabia have been the main factor behind the recent price weakness, according to Ole Hansen, an analyst at Saxo Bank.
Regional developments
A United Nations statement said Wednesday that divided delegates from eastern and western Libya have reached agreement on the process for appointing a central bank governor. The development could potentially resolve a crisis over control of Libya’s oil revenues that has disrupted exports. Libya’s crude exports averaged about 400,000 barrels per day in September, down from more than 1 million barrels per day in August, shipping data show.
The announcement of a new Chinese stimulus package helped limit losses. Top government officials in China, the world’s top crude oil importer, pledged Thursday to use “necessary fiscal spending” to meet this year’s economic growth target of about 5 percent. They acknowledged new challenges and raised market expectations for additional stimulus beyond what was announced this week.
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