Brent crude hits 4-year low as Saudi cuts prices

Front-month Brent fell to a low of $82.08, its weakest since Oct 2010

Brent crude oil fell more than three per cent to its lowest level in more than four years at near $82 a barrel on Tuesday, after top oil exporter, Saudi Arabia cut sales prices to the United States.

Front-month Brent touched a low of $82.08, its weakest since October 2010, and was down $2.35 at $82.43 a barrel by 1500 GMT.

US light crude was down $2.00 at $76.78 a barrel. It touched a session low of $75.84, its weakest since October 2011. Its discount to Brent hovered around $6.

Top global exporter Saudi Arabia increased its December official selling prices (OSPs), relative to benchmarks, to Asia and Europe on Monday, but lowered prices to the United States, a smaller export market.

“This is a mixed news, and the fact that the positive angle has not made an impact shows that market sentiment is very negative at the moment,” Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt, said.

A growing supply glut in the United States has led more than a dozen oil producers to create a new lobby group, Producers for American Crude Oil Exports (Pace), which seeks to end the country's 40-year ban on crude exports.

US commercial crude stocks are likely to have risen last week, according to a survey by Reuters, which if confirmed will be the fifth consecutive weekly stock build.

Industry group, the American Petroleum Institute will release its inventory data at 2130 GMT, and the Energy Information Administration will release official figures on Wednesday.

US crude futures slipped into contango on Monday for the first time since January. A contango structure indicates that front-month prices are lower than prices further forward.

“Contango makes a structure unattractive for re-investors because they make a loss when each month rolls over,” Tamas Varga, analyst at PVM Oil in London, said.

<b>No Opec consensus</b>

The absence of clear signs that the Organization of the Petroleum Exporting Countries (Opec) could curb output at its November 27 meeting also weighed on the prices.

Less than one month before the meeting, there is no consensus among trading houses as to whether OPEC members will agree on a cut.

“I can see Opec and Saudi Arabia playing the long game. A low price for a period of time may actually play into the hands of people with a lot of reserves in the ground at cheap cost,” Pierre Lorinet, chief financial officer of Trafigura, said at the Reuters Global Commodities Summit.

Ian Taylor, chief executive of Vitol, said at the Reuters summit that Opec members would have “serious discussions” about an output cut.

“My feeling is we are underestimating now the possibility of Opec cutting,” he said.

Members Venezuela and Ecuador are working on a joint proposal to defend oil prices, but the United Arab Emirates oil minister said the country is “not panicking”.

Ali al-Naimi, the oil minister of Opec's largest producer Saudi Arabia, has made no public comment on the oil market since September.

Naimi arrived on Tuesday in Venezuela, where he meets Venezuela's foreign minister today, according to a person close to the Saudi delegation. Foreign Minister Rafael Ramirez is a former energy minister and remains in charge of Venezuela's Opec delegation.