Oil prices are experiencing a decline early Monday as Saudi Arabia, one of the world’s largest oil exporters, has reduced prices. The international benchmark, Brent crude, saw a decrease of 2.8% to $76.53 per barrel, while the U.S. standard, West Texas Intermediate, fell by 3.1% to $71.55 per barrel. Over the past week, both contracts have dropped more than 4%, after starting the year with gains.
Despite concerns about potential disruptions to the market due to attacks on Red Sea shipping routes, oil supply appears to be plentiful at the beginning of 2024. This is evident in Saudi Arabia’s recent decision to lower the price of its flagship Arab Light grade to its lowest level in 27 months, which indirectly acknowledges this surplus.
While Saudi Arabia and Russia have agreed to limit oil output in order to support prices, other members of the Organization of the Petroleum Exporting Countries (OPEC) have been hesitant to do the same. Angola, for example, withdrew from the bloc as it did not want to restrict its own production.
In addition to the price reductions, Shell, one of the major players in the oil industry, announced on Monday that it would be taking an impairment on fourth-quarter earnings, estimating it to be between $2.5 billion and $4.5 billion. This impairment is primarily due to issues related to chemicals and products in Singapore. Exxon and Chevron also revealed that they would be facing significant charges on their last quarters’ earnings, although these were mainly associated with regulatory matters concerning assets in California.
As a result of this news, Shell’s American depositary receipts saw a 1% drop in premarket trading sessions.
