Saudi cuts crude price to Europe, hikes it for Asia

Brent oil prices fell to the lowest level since July 2004 on Wednesday, as worries over the health of the global economy added to the concerns that a global supply glut may stick around for longer than anticipated.

With little reason to expect stronger demand or cuts in production soon, investors seemed to discount the rising tension between the Saudis and Iranians over Saudi Arabia’s execution of an opposition Shiite cleric.

Still, a senior Iranian oil official said the country could moderate oil export increases once the sanctions are lifted to avoid putting prices under further pressure.

The sentiment was echoed by Bijan Zanganeh, Iran’s oil minister, who reportedly said last weekend that Iran would not seek to distort the markets but will make sure it regains its market share.

PARIS – Escalating diplomatic tension between Iran and Saudi Arabia has increased the strain on Opec’s unity as the cartel grapples with a common response to rock-bottom oil prices, experts said. However, crude inventories declined by 5.6 million barrels.

Nymex crude futures traded lower at United States dollars 35.97/barrel while Dated Brent prices were down at USD 36.42/barrel.

The fresh drop in oil prices has come as signs emerge of slower economic growth in China and as tensions heighten between Iran and Saudi Arabia, two prominent members of the Organization for the Petroleum Exporting Countries.

“With the lack of a strong upward catalyst on the horizon, we are not out of the [low oil price] woods yet”, said Miswin Mahesh, an oil market analyst at Barclays Capital, adding: “Non-Opec production from the North Sea, Canada and Brazil is falling, but not quick enough at a time when demand is weak, partly due to a mild winter in the northern hemisphere”.

The conflicts among major Middle East oil producers raised concerns about an oil price hike, but the global oil prices kept falling on January 3, 2016 and January 4, 2016. In a move seen as created to sabotage Iran’s oil comeback, Saudi Arabia has been cutting the price of its oil exports for February delivery to European customers, and of some exports to the United States and the Middle East.

February West Texas Intermediate crude CLG6, -4.67% gave up $1.48, or 4.1%, to $34.49 a barrel on the New York Mercantile Exchange, setting it on track for its lowest settlement since February 2009.

“The fact remains that global oil storage is near capacity and this will keep oil prices low”, Sam Barden, the director of Wimpole International, an energy market development company, told Trend. Last year, Iran imported about 5 million litres of high octane gasoline a day to blend with the locally produced fuel.