The price of crude oil, which had been sinking this fall, took another downward turn today.
Oil producers can choose to pump more or less oil, of course. They can also adjust prices. That’s what the world’s largest oil exporter did yesterday when Saudi Arabia cut prices for crude sold to U.S. customers.
Saudi Arabia is facing heavy competition from producers in the U.S. and nearby Latin America, according to oil strategist Julian Lee with Bloomberg First Word.
“I think the Saudis have cut crude prices to the U.S. in order to keep their oil competitive,” he says.
Lee says Saudi Arabia wants to retain a stable market share in the U.S.
Energy market analyst Sarah Emerson with ESAI warns against reading too much into yesterday’s price adjustment. Still, she thinks Saudi Arabia is trying to settle on a price per barrel that other members of the Organization of the Petroleum Exporting Countries can support when OPEC meets later this month.
“Saudi Arabia does not necessarily want to defend the price at $100 or $110,” she says. “But defending a price at $85 or $80 makes much more sense.”
Julian Lee says OPEC countries will review their production policy at the forthcoming meeting. There, he says, they could decide whether to cut production to shore up prices, or let prices fall further to choke off growth in North American production.