Oil Prices Continue Record Fall After Saudis Offer New Discounts

Saudi discounts put further pressure on the oil market, while other Middle Eastern nations announce plans to increase oil exports.

MOSCOW, December 5 (Sputnik) – Oil prices continued their fall on Friday, with the benchmark Brent Crude maintaining its Thursday drop to below $70 a barrel in the wake of Saudi Arabia’s decision to offer discounts on its oil to the Asian and US market.

“This is the second salvo in the OPEC price war, a new offensive by the Saudis," Phil Flynn, analyst at the Price Futures Group in Chicago, told Reuters yesterday, commenting on the price cut.

On Friday morning, Brent Crude oil traded at $69.20 a barrel, according to data from Bloomberg, down 44 cents from Thursday’s close, representing a drop of 0.63%. WTI oil traded at $66.22 a barrel, down 59 cents or 0.88%.

Reuters reports that Saudi Aramco, the state-owned Saudi oil company, cut January prices of its Arab Light grade by $1.90 a barrel for Asian customers, and cut prices for US customers by 70 cents. It follows the OPEC announcement on November 27 not to cut production and support prices, a decision which was enforced by the Saudis. The Kingdom is OPEC’s biggest oil supplier, producing around 8 million barrels a day.

The market also reacted to news that Libya is readying its El Sharara oilfield to resume production after closure last month due to a pipeline blockage and armed clashes in the region. The oilfield is one of OPEC’s largest and before its closure produced around 300,000 barrels a day.

News from Iraq this week of increased production also put pressure on prices. On Tuesday the WSJ reported the announcement on Iraqi television of a deal between the Iraqi government and its semi-autonomous Kurdistan region to export oil through Iraq’s national oil company from January. Under the terms of the agreement, 250,000 barrels of oil a day will be exported from Kurdistan and 300,000 a day from Kirkuk.