Investing.com – Oil Prices Decline

Oil prices settled sharply lower Thursday as Saudi Arabia reportedly plans to abandon its unofficial $100 price target while proceeding with an OPEC+ plan to boost output in December.

At 2:30 p.m. ET (1830 GMT), Brent oil futures fell 2.7% to $70.97 a barrel, and West Texas Intermediate crude futures dropped 2.9% to settle at $67.67 a barrel.

Saudi Prepares to Boost Oil Output in December

According to the Financial Times, Saudi Arabia, the world's top oil exporter, is preparing to abandon its unofficial $100 target for crude oil and increase its output instead.

The Organization of the Petroleum Exporting Countries (OPEC), traditionally led by the Saudis along with their allies like Russia (collectively known as OPEC+), have been cutting oil output to support prices. Earlier this month, the group decided to delay plans to gradually phase out additional cuts of 2.2 million barrels per day over the course of a year by two months to December.

Sources indicated to the FT that OPEC+ is set to proceed with output increases in September despite falling oil prices, as member pledges for deeper cuts could offset production that exceeds agreed quotas.

Additionally, media reports indicated that delegates from Libya’s eastern and western factions agreed on appointing a new central bank governor, resolving a crisis that had shut down much of the country’s oil production. These disruptions had resulted in over 1 million barrels per day offline, and a resumption in production could lead to a less tight market.

US Inventories Shrink More Than Expected

Potentially increased supply concerns have overshadowed rising tensions in the Middle East, with Israel continuing its offensive against Hamas and Hezbollah, raising the risk of disruptions from this key oil-rich region.

Moreover, data released Wednesday showed a larger-than-expected draw of 4.47 million barrels in U.S. inventories. Gasoline and distillate inventories also shrank, suggesting robust U.S. demand.

This draw occurred amid some disruptions in U.S. oil production, particularly from adverse weather in the Gulf of Mexico, where hurricane impacts were felt earlier in September and may continue with Hurricane Helene.

Despite these dynamics, prices experienced strong gains this week, particularly after China, the top importer, announced various stimulus measures to bolster growth. The shrinkage in U.S. oil inventories painted a tight market outlook.