Oil falls as Saudi Arabia cuts selling prices – business live

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Oil is weakening this morning after Saudi Arabia cut the prices charged to its customers.

The Middle Eastern energy powerhouse’s producer, Saudi Aramco, lowered its flagship Arab Light price to Asia by $2 per barrel, to $1.50 a barrel above the benchmark.

That’s a larger reduction than many in the industry expected, and is the biggest price cut in 13 months.

It lowers the February official selling price (OSP) of Saudi Arabia’s Arab Light crude to Asia to the lowest level in 27 months.

Aramco also cut all prices for February delivery to Northwest Europe, Mediterranean and North America.

The move indicates that concerns a slowing economy will hurt demand for oil are trumping fears that geopolitical tensions in the Red Sea will cause supply disruption.

The news has knocked Brent crude, the oil benchmark, down by 1.2% at the start of the week to $77.80 per barrel.

Late last year Saudi Arabia led the Opec+ group’s decision to make voluntary output cuts, to prevent a buildup of unsold oil. But those production cuts didn’t prevent oil posting its first annual fall since 2020 last year.

Geopolitical tensions are still heightened this morning, with US secretary of state, Antony Blinken, warning yesterdat that Israel’s war against Hamas risked spreading throughout the region.

IG analyst Tony Sycamore says those concerns will support the oil price:

“If we were just to focus on the fundamentals including, higher inventories, higher Opec/non-Opec production, and a lower-than-expected Saudi OSP, it would be impossible to be anything other than bearish crude oil.

However, that doesn’t take into account the fact that geopolitical tensions in the Middle East are undeniably rising again which will mean limited downside.”

Also coming up today

Financial markets remain edgy, as doubts creep in about how quickly central banks will be able to lower interest rates this year.

In the UK travel sector, a strike that threatened to halt all London Underground services for the next four days was called off last night, in a relief to commuters.

And there are signs of optimism in the UK factory sector, where manufacturers are more bullish about the sector’s prospects than they were 12 months ago.

A survey released this morning by industry body Make UK and PwC found that over 44% of companies see a moderate to significant improvement in industry conditions in 2024, while just a fifth expect conditions to worsen.

The agenda

• 7am GMT: German trade balance for November

• 10am GMT: Eurozone consumer and economic confidence data

• 1pm GMT: Israel business confidence report for December

• 4pm GMT: US consumer inflation expectations for December