Business Crude Oil: Is Saudi Arabia Starting a Price War Among OPEC Members?

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Crude oil is poised to extend the biggest slump in more than two years after Saudi Arabia signaled it is ready for a price war with other OPEC members, reports say.

Saudi Aramco, the state-run oil producer of the world’s biggest exporter, on October 1 cut price for all its exports, reducing those for Asia to the lowest level since 2008, sparking trader talk of an emerging OPEC price cutting war, as members of the producer group could compete to defend their market share amid ample supplies and tepid demand.

The move suggests that the biggest member of the Organization of Petroleum Exporting Countries is prepared to let prices fall rather than cede market share by paring output to clear a supply surplus

Industry and trading sources in the Middle East say there was now a risk of a race to the bottom, at a time when many were calling for unity from members of the Organization of the Petroleum Exporting Countries (OPEC) as it faces one of the steepest price slides since the financial crisis, according to BusinessDay.

Iraq and other OPEC members have also been cutting their Official Selling Prices (OSPs) as Brent has fallen, though the size of the Saudi price cut still surprised many observers.

It is believed that refraining from further cuts would preserve the volume of Saudi Arabia’s oil sales, curb revenues for competitors and discourage production of US shale oil.

International oil prices have fallen by 20 percent from a year high above $115 a barrel in June as faster-than-expected growth in US shale oil output and the return of production in Libya has contributed to a glut of crude in the market.

#OPEC #SaudiArabia

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