Oil Market Dips as Saudi Arabia Mulls Supply Boost

By Adedapo Adesanya

The oil market depreciated on Thursday as Saudi Arabia, the world’s top crude exporter, plans to give up its $100 price target in preparation for raising output, along with other members of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) in December.

This development pushed the price of Brent crude higher by $1.86 or 2.53 per cent during the session to $71.60 per barrel as the US West Texas Intermediate (WTI) crude gained $2.02 or 2.90 per cent to close at $67.67 per barrel.

Saudi Arabia is preparing to abandon its unofficial price target of $100 a barrel for crude as it gets ready to increase output, the Financial Times reported on Thursday, citing people familiar with the matter.

The publication also noted that OPEC+, to which Nigeria belongs, is preparing to increase output collectively in December.

OPEC+ was originally expected to begin unwinding part of its 2.2 million barrels per day of oil output cuts in October this year. That has since been delayed due to the oil price crash in late August and early September.

OPEC+ delayed the start of the unwinding of the cuts by two months until December 2024.

Prior to the development, the Russian Deputy Prime Minister, Mr Alexander Novak said that OPEC+ was not discussing any proposals for changes to the expanded cartel’s output cuts.

Foregoing its $100-per-barrel price target will mean that Saudi Arabia will have to accept low oil prices to regain market share, and other producers may have to follow suit.

However, Reuters reported that the producer group is set to go ahead with a December oil output increase because its impact will be small should a plan for some members to make larger cuts to compensate for overproduction be delivered in September and later months.

Meanwhile, Libya’s divided east and west regions agreed to appoint a central bank governor, a step which could help resolve the crisis over control of the country’s oil revenue, which has disrupted exports.

Libya’s crude exports have averaged about 400,000 barrels per day in September, down from more than 1 million barrels per day in August.

The UN Libya Mission said delegates from the House of Representatives, based in Benghazi in the east, and the High State Council based in Tripoli in the west had reached a compromise on appointing a new leadership for the bank, but it did not give any names.

Support came from news of a new Chinese stimulus package, a move that could offer respite for the world’s largest oil importer.