Oil prices fell more than 1% as Saudi Arabia cut its official selling price for February to Asia

(1) Oil prices fell more than 1% on Monday as the Organization of the Petroleum Exporting Countries (OPEC) increased production as Saudi Arabia, the world’s largest crude exporter, cut prices sharply, offsetting concerns about escalating geopolitical tensions in the Middle East. Brent crude fell 1.6% to $77.58 a barrel, and U.S. West Texas Intermediate oil futures fell 1.71% to $72.58 a barrel. (2) Vandana Hari, founder of oil market analyst Vanda Insights, said: "Aramco’s cut in its official selling price (OSP) in February reinforces the narrative of weak demand. ” (3) Increased supply and competition from rivals from oil producers prompted Saudi Arabia on Sunday to cut its February Asian OSP for its flagship Arabian Light crude to its lowest level in 27 months. (4) IG analyst Tony Sycamore said: “If we focus solely on fundamental factors, including rising inventories, OPEC/non-OPEC production increases, and lower-than-expected Saudi official selling prices, then there is only one way to be bearish on oil.” However, this does not take into account the fact that geopolitical tensions in the Middle East are undeniably heating up again, which would mean limited downside. ” (5) Brent and WTI crude rose more than 2% in the first week of 2024 as investors returned to work after the holiday season focused on the geopolitical risks in the Middle East following the Houthi attack on Red Sea ships in Yemen (Yemen). (6) U.S. Secretary of State Antony Blinken, who is visiting the Middle East this week, said the conflict in Gaza could spread throughout the region unless all parties work together to achieve peace. Israeli Prime Minister Benjamin Netanyahu has vowed to continue the war until Hamas is eliminated. (7) The Organization of the Petroleum Exporting Countries (OPEC) increased output by 70,000 b/d in December to 27.88 million b/d, offsetting upward pressure on prices from geopolitical concerns, a survey showed. (8) “At a time when oil prices are succumbing to expected bearish factors such as weak global demand and rising inventories, Red Sea tensions are the only countervailing force, albeit relatively weak and intermittent,” said Hari of Vanda Insights. ” (9) Separately, Baker Hughes said in the weekly report that the number of U.S. oil rigs increased by one last week to 501. JPMorgan estimates that 26 oil rigs will be added this year, most of them in the Permian Basin region