Global oil prices fell the most since early November Monday, pulling the U.S. gasoline average closer to $3 a gallon, as concern tied to energy demand in the world's biggest economies continues to offset the impact of supply disruptions in the Middle East.
Saudi Arabia's state-owned oil company, Aramco, cut the prices of its Asia crude exports over the weekend to the lowest levels in more than two years as demand from China continues to wane amid its sputtering post-covid recovery.
Data from Reuters also suggested the collective output from OPEC members rose by 70,000 barrels last month. The move tests the resolve of cartel members to maintain production cuts bargained by Saudi Arabia and non-member Russia.
The moves offset concern about the safety of crude-oil shipments through the Red Sea, and into the Suez Canal, following a series of attacks by Iran-backed Houthi rebels based in Yemen.
"Saudi Arabia cut its February official selling prices for all regions, underscoring the current tug of war between a worsening global demand outlook and concerns that Red Sea tensions and the Israel-Hamas war could spill over into a regional conflict," said Saxo Bank's chief commodity strategist, Ole Hansen.
"However, while supply disruptions remain a threat only, slowing demand is real and it may bring focus back on OPEC+ and their ability to keep prices supported in the $70 to $75 area," he added.
Brent crude futures contracts for March delivery, the global pricing benchmark, were last seen down $2.91 on the session and trading at $75.86 per barrel.
WTI futures for February delivery, which are tightly linked to domestic gasoline prices, fell $3.12 to $70.69 per barrel.
Knocking on the door of the lowest #gasprices in nearly 1,000 days here... $3.025/gal national average pic.twitter.com/2gBzZsTDul
— Patrick De Haan ⛽️📊 (@GasBuddyGuy) January 8, 2024
U.S. gasoline supply swells
A big buildup in domestic gasoline supplies, reported last week by the Energy Department, is also weighing on prices and suggests overall consumer demand remains weak heading into the start of the winter driving season.
That's clipped the national average of a gallon of gas for the second consecutive week, according to the energy advocate Gasbuddy.com, to around $3.025, the lowest in more than 2 1/2 years.
AAA, meanwhile, pegs the national average at $3.077 per gallon, down around 3 cents from a week ago and more than 6.2% lower than the year-earlier period.
“Sluggish gasoline demand has led to the national average easing again and brings back the potential for the national average to drift under $3 per gallon for the first time since 2021,” said Gasbuddy's head of petroleum analysis, Patrick De Haan.
“With a record rise in gasoline inventories last week as demand was anemic during the holidays, motorists have provided the catalyst for falling prices," he added. "If demand remains weak, gasoline prices could fall further."
Saxo Bank's Hansen also notes that commodities traders are the most bearish on overall demand since at least 2015, based on data last week from the U.S. Commodity Futures Trading Commission.
Crude oil prices also led the Bloomberg Commodity Index, which tracks a basket of 24 major futures markets, sharply lower last week.
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