(Bloomberg) — Oil swung in a choppy trade as investors weighed a price cut on Saudi Arabia’s main grade of crude to Asia, another sign an oversupplied market is weighing on the world’s oil producers even amid considerable geopolitical tensions.
West Texas Intermediate traded around $59 a barrel on Wednesday. State producer Saudi Aramco will reduce the price of its flagship Arab Light crude grade to a 60-cent premium to the regional benchmark for January, according to a price list seen by Bloomberg. The cut brings prices to the lowest level since 2021, yet another sign of surplus in global oil markets driving prices down worldwide.
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To be sure, international tensions are adding a risk premium to prices. Ukrainian negotiators will have a new round of talks in Florida as Russian President Vladimir Putin said some points in a US-backed peace plan to end Moscow’s war were unacceptable to him. That means a lifting of sanctions on Russian oil is still elusive, offering support to prices.
And US President Donald Trump reiterated the US will start striking alleged drug cartels on land in Venezuela very soon. Military intervention could force oil production and exports to drop in the South American nation.
Still, crude prices are down about 18% this year as booming supply from the Americas, coupled with hikes from the OPEC+ group itself, exceeded subdued demand growth. The International Energy Agency has predicted a record glut in 2026, while Wall Street banks expect futures to head lower.
While dropping prices are a pain point for producers, they offer a boon for consumers. US gasoline prices fell below $3 a gallon for the first time in four years on Tuesday. Meanwhile, the price of diesel has been steadily ticking down in recent weeks.
Saudi Arabia’s falling prices mirror a similar story in Canada, where surging production from Alberta is meeting an already well-supplied world market. Canadian crude prices have fallen to their weakest point relative to the US benchmark since March.
“No matter how much demand is going to come in, you just have a lot of supply,” Trafigura Group’s Chief Economist Saad Rahim said at the Financial Times Commodities Asia Summit in Singapore on Wednesday. “The path of least resistance for prices is likely down.”
–With assistance from John Liu, Sarah Chen and Yongchang Chin.
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