U.S. crude oil falls more than 4% as Saudi price cut heightens global demand worries

U.S. crude oil declined over 4% on Monday as Saudi Arabia lowered its prices. This move raised concerns about oversupply in the market alongside weakening demand. The West Texas Intermediate futures contract for February dropped by 4.84% to trade at $70.24 a barrel. The Brent futures contract for March also fell by 3.91% to $75.68 a barrel. The price cut by Saudi Arabia reflects market weakness attributed to high U.S. crude production and softer demand in China. Geopolitical risks have been overshadowed by persistent concerns about supply and demand dynamics. Despite rising tensions, crude supplies remain unaffected. Secretary of State Antony Blinken has embarked on a diplomatic tour in the region to reduce tensions. The global oil market remains well supplied, with the U.S. producing 13.2 million barrels per day in the last week of 2023. The U.S. crude exports rose to 5.2 million barrels per day in the same period. Saudi Arabia’s price cuts aim to deter customers from buying U.S. crude while undercutting Iranian and Russian barrels. It remains to be seen whether this strategy will be effective.