Oil futures: Crude tumbles 4% after Saudi cuts February OSPs
Quantum Commodity Intelligence – Crude oil futures Monday were sharply lower with markets unable to hold the gains seen at the back end of last week after Saudi Arabia slashed OSPs, although Middle East tensions continued to keep oil markets on edge.
Front-month Mar24 ICE Brent futures were trading at $76.05/b (1920 GMT), compared to the day's range of $75.26-$78.95/b and Friday's settle of $78.76/b.
At the same time Feb24 NYMEX WTI was trading $70.74/b, versus Friday's settle of $73.81/b.
Saudi Aramco slashed Official Selling Prices (OSPs) on February cargoes, with differentials for the flagship Arab Light grade cut to Platts Dubai/DME Oman +$1.50/b, down from +$3.50/b in January and the lowest OSP since November 2021.
The number was at the lower end of expectations but helps bring Arab Light closer in pricing terms to similar regional grades after a crunch on spot premiums for the Middle East during Q4, with refiners saying that OSPs had been set on the high side in the previous two months.
But the move was still seen as negative, with some analysts commenting the Saudis were forced into deeper cuts or risk lower offtakes from term buyers in February.
Concerns were also raised again over record US production, potentially weak demand growth and excess OPEC+ spare capacity after the latest round of cuts were implemented.
Confirmation of ongoing problems at Libya's Sharara oilfield initially helped underpin prices after Libya's NOC declared force majeure on Sunday with renewed protests shutting in production.
The move was a flashback to 2022, when Libyan crude output slumped by around 50% during the summer of that year, causing regular force majeure on exports.
Middle East
Rising tensions in the Middle East, particularly the escalation in Houthi attacks on commercial shipping in the Red Sea, are also supporting prices, although most crude shipments continue via the transit point. However, vessel tracking data indicated LNG and LPG shipments are being increasingly diverted.
But the prospects of long-lasting conflict in the region were seen increasing after Israeli defence officials said they expect fighting in Gaza to continue for at least a year.
Meanwhile, Hezbollah has increased its attacks in northern Israel in retaliation for the killing of Hamas deputy political leader Saleh al-Arouri from an Israeli strike on Lebanon last week. Overnight, the IDF also said it carried out a series of airstrikes against Hezbollah sites in Lebanon.
The broadly firmer tone in 2024 was briefly rocked last week after the massive increase in US product inventories, with gasoline and distillates up more than 10 million barrels, making this week's EIA data a crucial indicator.
