Oil prices came under severe pressure overnight. Brent costs only just above $83 per barrel this morning, which is $3 down on yesterday. Its price is thus once again nearing the four-year low it hit in mid-October. WTI actually fell even more sharply and at a good $77 per barrel is now cheaper than it has been at any time since October 2011. The price differential between the two oil types is $6 per barrel again – the last time this was the case was in mid-September. The price slide was triggered by Saudi Arabia lowering its official selling prices for the US. The fact that it has reversed its most recent price reduction for Asia has been largely ignored, however. Apparently Saudi Arabia is now concentrating more on defending its market shares on 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. Venezuela especially is likely to see this as an affront; it mainly supplies the US market and was one of the few OPEC members to demand that measures be taken to shore up oil prices. With just 3½ weeks to go before OPEC’s meeting, however, Saudi Arabia does not appear willing to curb its supply. This makes it rather unlikely that any agreement to jointly reduce production will be reached on 27 November and suggests that pressure on oil prices will persist. The Oil Minister of the United Arab Emirates said yesterday that OPEC is concerned about the slump in the oil price but is not panicking. This statement is also unlikely to do anything to halt the price slide – OPEC’s Secretary-General had also expressed a similar view recently.
