Global oil prices have dropped to $71 per barrel, signaling new pressures in the market.
This sharp decline follows a decision by Saudi Arabia’s oil giant, Aramco, to cut prices for Asian customers.
The cuts, deeper than many analysts expected, reflect ongoing challenges in stabilizing oil prices.
Brent crude, the benchmark for global oil prices, has struggled to stay above $75 in recent weeks.
Aramco’s move comes amid weak global demand and OPEC’s delayed measures to control production.
The company reduced the price of its key Arab Light crude to a premium of 90 cents per barrel above the regional benchmark for January sales.
Price Cuts Target Asia
Aramco’s price reductions focus primarily on its Asian market.
Analysts say the move underscores concerns over China’s lagging crude oil demand.
“With China’s crude demand still low, OPEC is fighting to maintain prices above $70 per barrel,” a London-based commodity analyst said.
Aramco has also reduced prices for northwestern Europe and the Mediterranean markets.
However, prices for North America have remained unchanged, showing a selective pricing strategy.
Despite the adjustments, Aramco continues to dominate the global oil market, generating $494 billion in revenue in 2024.
OPEC’s Challenges in Stabilizing Prices
The drop in oil prices adds to the challenges faced by OPEC, the global oil producers’ cartel.
OPEC recently downgraded its global oil demand growth forecast for 2024 for the fourth time.
The forecast was cut to 1.93 million barrels per day (bpd), down from 2.03 million bpd.
Its 2025 demand growth estimate also dropped to 1.54 million bpd from 1.64 million bpd.
These adjustments have made it harder for OPEC to maintain oil prices above $75.
Since October, crude oil prices have fallen nearly 9% from their high of $80.35 per barrel.
“Efforts are now focused on holding the Brent price floor at $70,” the analyst added.
Market Trends in 2024
The global oil market has seen a turbulent 2024.
The year began with Brent crude trading at $80.55 per barrel, supported by modest gains through April.
However, the market turned bearish in May, with prices under pressure from higher trading volumes.
By September, prices had dropped to $71.70 per barrel, reflecting consistent declines.
A brief recovery in October offered some hope, but OPEC’s revised forecast reignited bearish trends.
By November 12, prices had fallen further to $71.89 per barrel.
Aramco’s recent price cuts appear to have accelerated the downward trend.
Impact of Weak Asian Demand
Weak crude oil demand from China is a significant factor in the price decline.
China, the world’s largest oil importer, has yet to show signs of strong recovery in its demand for crude.
This has left OPEC and major producers like Aramco scrambling to adjust their strategies.
Aramco’s cuts are seen as an attempt to retain market share in Asia while grappling with declining global demand.
Industry insiders believe these measures might offer short-term relief but could further pressure long-term pricing stability.
