Saudi price cuts send New York oil prices to three-year low

Saudi price cuts send New York oil prices to three-year low

US benchmark West Texas Intermediate for December delivery dropped US$1.59 to US$77.19 a barrel on the New York Mercantile Exchange, its lowest close since October 2011. The contract got as low as US$75.84 earlier in the session.

European benchmark Brent oil for December delivery fell US$1.96 to US$82.82 a barrel, its lowest close since October 2010.

Analysts saw the Saudi move as an effort to hold onto market share in North America against cheaper oil flooding in from US shale fields.

Saudi Arabia meanwhile raised the prices for its oil sold to Asia and other locations, but those increases have “been largely ignored,” said Commerzbank.

“Apparently Saudi Arabia is now concentrating more on defending its market share in the US market, which could pose a problem in particular for Canada, Mexico and Venezuela (other leading suppliers of oil to the US) and for US shale oil producers.”

The Saudi move adds to downward pressure on oil prices, which in New York have dropped more than 20 per cent since June.

Morgan Stanley suggested the selling could be overdone.¬†“A strong reversal is possible over the coming months,” it said, but added that there are “few catalysts” ahead of an OPEC meeting Nov 27.

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