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Oil Prices Slump by 4% As Demand Concerns Trump Supply Risks

Oil prices plunged by nearly 4% early on Monday after Saudi Arabia signaled potentially weaker demand ahead by cutting the price of its oil across the board. 

As of 9:22 a.m. ET on Monday, the U.S. benchmark, WTI Crude, was down by 3.75% to $70.83. The international benchmark, Brent Crude, had slumped by 3.53% on the day, at $75.87.

The move lower was triggered by Saudi Arabia, the world's top crude oil exporter, which cut the official selling prices (OSPs) for its crude loading in February to all regions. The cut for Asian importers was the deepest, at $2 per barrel for all grades that Saudi Arabia exports. The price cut is the deepest in 13 months but was in line with expectations, which also feature a softer Asian market for crude.

Concerns about oil demand overshadowed the continued risk to cargoes in the Red Sea and a force majeure in Libya, where the National Oil Corporation (NOC) has declared a force majeure on the country's largest oil field, Sharara, amid protests from local communities.

The force majeure entered into effect on Sunday, the NOC said on X, adding that it was negotiating with the protesters in a bid to resume the oil flow to the Zawya export terminal.

Sharara, which can produce up to 300,000 barrels of crude daily is a magnet for protesters and various political and paramilitary factions that want to make a point or prompt government action.

Large oil product builds in the United States, reported last week, and a survey showing that OPEC's oil production rose in December also weighed on oil prices early on Monday.

Moreover, traders and speculators have been increasingly bearish on crude oil in the past two weeks. Additional downward pressure on oil could come this week from the annual rebalancing of the two biggest commodity indexes - the Bloomberg Commodity Index and the S&P GSCI.  

By Tsvetana Paraskova for Oilprice.com

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Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.  More

Comments

  • George Doolittle - 8th Jan 2024 at 11:06pm:
    Every Petro State outside of the USA and Alberta Canada is flat fucking broke right now especially with the rise of natural gas super powers USA, Australia and Qatar. Even the Netherlands is talking about turning back on Groenigen. "Prices are high because the USA can't find buyers" except for natural gas which remains dirt cheap *AND* global with great shipping economics. Oil? Great *IMPORT* economics at the moment I would go with that. Good luck KSA trying to win that Battle tho as Venezuela and Brazil are ramping up big time...to ship to where I have no idea. Even Exxon wants Atlantic Canada work now.
  • bill vickers - 8th Jan 2024 at 10:02am:
    You report as if tis was a legitimate market movement. We all know every movement is magnified by the CTA's. Why don't you report honestly what is really happening? Better yet if you legitimately care about and choose to report on oil, do something about computers trading with themselves or friends computers and manipulating the price.
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