Oil plunges as Saudis abandon goal to push value to $100 a barrel

Oil prices dipped sharply yesterday as Saudi Arabia reportedly abandoned its target to push them up to $100 a barrel.

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

The fall should boost motorists, who are already enjoying the lowest petrol prices in three years.

Oil prices topped $90 a barrel earlier this year, partly due to worries about a demand slump in China, the world’s second biggest economy.

Oil slump: Brent crude fell by as much as 3.7% after Saudi Arabia reportedly abandoned its target to push oil prices up to $100 a barrel

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

But supply issues are also a factor, making the approach taken by Saudi Arabia, the world’s biggest producer, crucial.

The Kingdom and its oil-producing allies try to keep a handle on the price movements by reducing the flow when they want to push the price up. 

If it is too high for customers to stomach they can also open the taps to ease it back.

Saudi Arabia had been unofficially targeting a price of $100 a barrel. Yesterday the Financial Times reported that it was preparing to abandon the target.

The Organisation of Petroleum Exporting Countries (OPEC) together with countries including Russia – together known as OPEC+ – had been cutting output to support prices. But supply from elsewhere, including the US, has affected the price.

Meanwhile, developments from embattled Libya, where divisions between the east and west of the country have disrupted exports, have also pushed it down.

A United Nations statement yesterday said the two sides had agreed on how to appoint a central bank governor, which could help resolve the crisis.

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

Shares in BP fell 4.1 per cent, knocking £2.7billion off its value while Shell dropped 4.6 per cent, reducing its value by £7.3billion.

This week, RAC figures showed average unleaded petrol prices were 135.7p a litre, the lowest since September 2021.

And the motoring organisation said there was scope for prices to fall further.

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