A day after the leading oil exporter Saudi Arabia cut down the sales prices to the US, the Brent crude oil prices on Tuesday dropped more than three percent to its lowest level in over four years near USD 82 a barrel.
Front-month light crude was recorded at a low of USD 82.08 to reach its weakest level since October 2010. It was low at USD 2.35 at USD 82.43 a barrel by 1500 GMT.
US Brent was down USD 2.00 at USD 76.78 a barrel. It reached a session low of USD 75.84, which was its weakest level since October 2011.
Top global oil exporter Saudi Arabia had on Monday increased its December official selling prices (OSPs), relative to the benchmarks, to European and Asian countries, while lowering the prices in the smaller export market, the US.
Eugen Weinberg, commodities research head at Frankfurt’s Commerzbank, said, “This is mixed news. The fact that the positive angle has not made an impact shows that market sentiment is very negative at the moment.”
A boost in the supply surplus in the US resulted in the creation of a new lobby group, known as Producers for American Crude Oil Exports (PACE), by over a dozen oil producers. The new lobby sought to end the 40-year ban on crude exports of the country.
On Monday, the US crude futures dipped into contango, a structure that suggests front-month prices are lower than prices further forward, for the first time since January this year.
PVM Oil analyst Tamas Varga said, “Contango makes a structure unattractive for re-investors because they make a loss when each month rolls over.”