Oil plummets after Saudi Arabia abandons goal of pushing price to $100 per barrel

Oil prices fell sharply yesterday after Saudi Arabia reportedly abandoned its target to boost prices to $100 a barrel.

Brent crude fell as much as 3.7 percent to $70.72, a two-week low, slashing the value of London-listed energy giants BP and Shell by billions.

The drop should give a boost to motorists, who are already enjoying the lowest petrol prices in three years.

Oil prices crossed the $90 per barrel mark earlier this year, partly due to concerns about a drop in demand in China, the world’s second-largest economy.

Beijing tried to allay fears this week with the announcement of stimulus packages by the central bank and the politburo.

But supply problems also play a role, making the approach of Saudi Arabia, the world’s largest producer, crucial.

The kingdom and its oil-producing allies are trying to control price movements by cutting flows when they want to boost prices.

If it is too high for customers to bear, they can also open the taps to let it flow back.

Saudi Arabia unofficially targeted a price of $100 per barrel. Yesterday, the Financial Times reported that it was preparing to leave the target.

The Organization of the Petroleum Exporting Countries (OPEC), along with countries such as Russia – together known as OPEC+ – had cut production to support prices. But supply from elsewhere, including the US, has influenced the price.

Meanwhile, developments in embattled Libya, where divisions between the country’s east and west have disrupted exports, have also pushed the country down.

A United Nations statement yesterday said the two sides had agreed on the appointment of a central bank governor who could help resolve the crisis.

“The prospect of additional supply from Libya and Saudi Arabia has been the main driver of the latest weakness,” said Ole Hansen, an analyst at Saxo Bank.

BP shares fell 4.1 percent, reducing their value by £2.7 billion, while Shell fell 4.6 percent, reducing their value by £7.3 billion.

This week, RAC figures showed the average price for unleaded petrol was 135.7 pa litres, the lowest since September 2021.

And the automotive body said there was room for a further fall in prices.

A fall should lower inflation, which could give the Bank of England leeway to cut rates.