Oil prices fall after report Saudi Arabia to scrap price target, boost output

By Myra P. Saefong and William Watts

WTI, Brent oil trade at lowest prices in about two weeks

Oil futures fell on Thursday, pressured after the Financial Times reported that Saudi Arabia was ready to abandon its $100-a-barrel price target as it prepares to increase production in a bid to take back market share.

Price moves

West Texas Intermediate crude CL00 for November delivery CL.1 CLX24 fell $21.81, or 2.6%, to $67.88 a barrel on the New York Mercantile Exchange. A settlement around this level would be the lowest since Sept. 10, FactSet data show. November Brent crude BRNX24, the global benchmark, dropped $1.47, or 2%, to $71.99 a barrel on ICE Futures Europe, trading at its lowest in about two weeks. The more actively traded December Brent contract BRN00 BRNZ24 was down $1.35, or 1.9%, at $71.55 a barrel.October gasoline RBV24 lost 1.3% to $1.974 a gallon, while October heating oil HOV24 fell 1.4% to $2.1307 a gallon.Natural gas for October delivery NGV24 traded at $2.621 per million British thermal units, down 0.7% ahead of the contract's expiration at the end of the session.

Market drivers

Saudi Arabia and seven other members of OPEC+ - made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia - previously agreed to push back the unwinding of some production cuts from October to December, sparking speculation the output boost could be indefinitely postponed. The Financial Times report, citing unidentified persons described as familiar with the country's thinking, said Saudi Arabia is committed to resuming that production on Dec. 1 even if it leads to a period of lower prices.

To be clear, the story "contained no new information in and of itself," said Kieran Tompkins, climate and commodities economist at Capital Economics, in a note dated Thursday.

OPEC+ had announced in early September a two-month delay to the unwinding of its 2.2 million-barrel-per-day voluntary production cuts. Given that, Capital Economics sees "no reason to alter our below-consensus forecast for Brent crude to end 2025 at $70" a barrel, Tompkins said .

In a report Thursday, Anas Alhajji, an independent energy expert and managing partner at Energy Outlook Advisors, said that there was no price target of $100 for the Saudis - "hence there is nothing to abandon."

The whole idea is that OPEC+ wants to unwind the voluntary cuts, and "that is it. This has been known for months," said Alhajji. This "has nothing to do with abandoning any position."

Still, while the story on the Saudis is not "new news," Tompkins believes it is the "clearest sign yet that Saudi Arabia is getting frustrated with its inability to push oil prices higher by reducing output while inadvertently losing market share."

OPEC+'s Joint Ministerial Monitoring Committee will hold its next meeting on Oct. 2, and the next full ministerial meeting is scheduled for Dec. 1.

Pressure on oil was also tied to reports that eastern and western factions in Libya have patched up disagreements over leadership of the nation's central bank that had led to a sharp fall in crude output, noted Ricardo Evangelista, a senior analyst at ActivTrades.

Crude prices climbed sharply on Tuesday after China, the world's largest crude importer, unveiled an aggressive economic stimulus program. Doubts over the ability of the measures to deliver a lasting boost to the economy of the world's largest crude importer contributed to a retreat Wednesday, analysts said.

"With rising supply and uncertain demand, oil prices may face further downward pressure in the near term," Evangelista said.

Traders, meanwhile, continue to monitor Hurricane Helene, which is expected to make landfall on the Florida coast late Thursday.

As of Wednesday, the Interior Department's Bureau of Safety and Environmental Enforcement reported that 29.18% of the region's oil production and 16.85% of the area's natural-gas production were shut in because of the storm.

Natural-gas futures, meanwhile, traded lower after the EIA reported Thursday that U.S. working gas in storage rose by 47 billion cubic feet for the week that ended Sept. 20. Analysts at StoneX said the market expected a 53 bcf increase.

The data, however, included revisions to figures tied to reclassifications of some natural gas in storage from working gas to base gas. Working gas is the volume of gas available in the market. With the reclassifications, the implied flow for the week is an increase of 55 bcf to working gas stocks, the EIA said.

-Myra P. Saefong -William Watts

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09-26-24 1052ET

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