ANKARA
By Ovunc Kutlu
Brent crude oil price, the leading global benchmark for oil trading, has fallen to its lowest point in four years on Tuesday, according to official figures.
Brent crude oil price reached $82.12 on Tuesday at 1:30 pm GMT after Saudi Arabia cut its official selling prices for the U.S., and increased them for Asia and Europe. The oil was traded at $84.66 at 2:30 am GMT last Friday, after falling from $87.90 per barrel last Wednesday.
"Saudi Arabia raised its official selling price for Asia and Europe, while reducing it for the U.S.," said Dominic Haywood, a crude oil analyst for London-based energy market consultancy Energy Aspects.
"That is a reflection of competition in various markets," said Thomas Pugh, a commodities economist at Capital Economics, a London-based independent research company.
"In the U.S., the Saudis are competing with domestic production. In Asia and Europe, it is competing with other OPEC suppliers and Russia. There is not as much competition in Europe and Asia as there is in the U.S.," he added.
Since the 2008 shale boom, the U.S. has enjoyed rising domestic oil production, which increased from 1.8 billion barrels in 2008 to 2.7 billion barrels in 2013, according to the U.S. Energy Information Administration.
"If you have rising domestic production and rising imports from Saudi Arabia due to lower selling prices at the same time, then it is inevitable that West Texas Intermediate (the American benchmark for oil pricing) prices will fall due to a greater supply," said Haywood.
West Texas Intermediate has fallen to $76.29 on Tuesday at 1:30 pm GMT, from $79.74 per barrel mark on Friday at 2:30 pm.
"In terms of the U.S., the market believes that Saudi Arabia could be attempting to secure more of a market share by sending more of its oil to the U.S.," Haywood said.
"Saudi Arabia wants to maintain its close relationship with the U.S., and one way to do that is through energy supplies. If you offer crude oil for a cheaper price, then you guarantee more U.S. crude oil imports from Saudi Arabia," he added.
"The market is pessimistic about the demand, which is weak, but is not as weak as it was when the markets crashed (in 2008)," Pugh said, adding that the demand growth remains sluggish, but has not completely collapsed.
Oil prices have stabilized around the $86 per barrel mark for the last few weeks after taking a dive in July. The decline in oil prices is the result of a combination of factors.
The increasing value of the U.S. dollar weakened the purchasing power of oil-dependent countries since oil prices are indexed to the dollar worldwide. Additionally, the shale oil production boom in the U.S. hampered oil import volumes, thus decreasing global demand.
Furthermore, Asian countries’ growth rate, which transpired to be below expectations, decreased energy-hungry countries' oil demands, while recovery in European markets was slower than hoped.
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