Saudi Arabia Reacts to US Oil Boom, Slashes Oil Prices to Boost Demand in Asia

Saudi Arabia Reacts to US Oil Boom, Slashes Oil Prices to Boost Demand in Asia

Saudi Arabia, the world’s leading oil exporter, is adjusting its strategy in response to the booming US oil production, leading to a price cut to stimulate Asian demand. State-owned Saudi Aramco announced a reduction in the price of its flagship Arab Light crude headed to Asia in January by 50 cents to $3.50 a barrel, marking the first such cut since June.

This decision reflects Saudi Arabia’s challenges due to weakening demand amid increased oil supply from other global players, particularly the United States. According to the Energy Information Administration, the US crude oil production surge reached a record 13.2 million barrels a day in September. The oversupply of sweet or low-sulfur crude in recent weeks, fueled partly by robust US exports, has contributed to falling prices.

The competition has intensified as non-OPEC+ producers, including Brazil, ramp up production while Saudi Arabia and Russia implement supply cuts. The influx of oil from countries outside the OPEC+ alliance has weighed down crude prices, leading to increased competition against Saudi crude. On Wednesday, Brent crude experienced a 3% decline, dropping below $75 a barrel and registering a more than 20% decrease from its September high.

Despite the challenges in propping up prices, Saudi officials remain committed to output cuts. Riyadh’s energy minister mentioned on Bloomberg TV this Monday that the cuts could “absolutely” extend beyond the first quarter of next year. This comes after OPEC+ announced plans last week to reduce supply by more than 2 million barrels daily in the coming year.

Energy expert Paul Sankey anticipates a potential “market share war” initiated by Saudi Arabia against the US by pivoting towards production increases next year. The move to lower oil prices to boost demand in Asia is a strategic response to the changing dynamics in the global oil market, where the US has emerged as a formidable competitor with its record-breaking production levels. Saudi Arabia’s adjustment underscores the complex interplay of supply and demand dynamics in the evolving landscape of the energy sector.

TechGolly editorial team led by Al Mahmud Al Mamun. He worked as an Editor-in-Chief at a world-leading professional research Magazine. Rasel Hossain and Enamul Kabir are supporting as Managing Editor. Our team is intercorporate with technologists, researchers, and technology writers. We have substantial knowledge and background in Information Technology (IT), Artificial Intelligence (AI), and Embedded Technology.

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