Oil dived to a two-week low on Thursday after the Financial Times reported that Saudi Arabia was ready to abandon its $US100-a-barrel price target and increase production in a bid to reclaim market share.
West Texas Intermediate crude fell 3.2% to $67.44 a barrel early Friday morning, Australian time, in New York, while Brent crude, the global benchmark, dipped to $US70.80.
Not even intensified fighting in and around Israel, or a massive new hurricane set to make landfall in the southeast of the US, could stop the slide in prices.
Crude prices had risen sharply on Tuesday after China, the world's largest crude importer, unveiled an aggressive stimulus program. Thursday saw official support for the program with a statement from the second-highest body in China, the Politburo.
The slide is expected to put pressure on ASX oil stocks on Friday after they struggled on Thursday. Woodside shares fell 2.4%, despite the price rally, as investors grew increasingly disenchanted with management. Santos shares also fell by more than 2% for similar reasons.
The primary driver of the decline is the looming move by Saudi Arabia and seven other members of OPEC+ to restore production. The group had previously agreed to push back the unwinding of some production cuts from October to December, sparking speculation that the output boost could be postponed indefinitely.
The Financial Times report, citing unidentified individuals familiar with the country's thinking, said Saudi Arabia was committed to resuming production on December 1, even if it leads to a period of lower prices.
Additional pressure stemmed from reports that eastern and western factions in Libya have reconciled disagreements over the leadership of the nation's central bank, which had contributed to a sharp fall in crude output.
A price/output/market share war could damage Russia, the only non-OPEC country in the group. The US, currently the world's largest producer, is in the midst of an election campaign, and there’s no doubt the Biden administration would favour a fall in oil prices.
The news from China saw Comex gold touch $US2,700 an ounce for the first time, peaking at $US2,708.70 an ounce on Thursday. It was around $US2,695 just before 7 am, Sydney time.
Comex silver futures rose past $US32 an ounce, while Comex copper futures gained more than 3%, ending at $US4.64 a pound—the highest level since May. This was a very positive response to the stimulus talk coming out of China.
