Oil plunges after Saudi Arabia abandons goal of raising price to $100 a barrel

Oil prices fell sharply yesterday as Saudi Arabia reportedly abandoned its goal of raising them to $100 a barrel.

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

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

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

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

But supply issues are also a factor, making the strategy adopted by Saudi Arabia, the world’s largest producer, crucial.

The Kingdom and its oil-producing allies try to control price movements by reducing flow when they want to drive up the price.

If it is too high for customers to handle, they can also turn on the taps to relieve it.

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 Organization of the Petroleum Exporting Countries (OPEC), along with countries such as Russia (together known as OPEC+), had been cutting production to support prices. But supply from other places, including the United States, has affected the price.

Meanwhile, developments in embattled Libya, where divisions between the east and west of the country have disrupted exports, have also put downward pressure.

A United Nations statement said yesterday that the two sides had agreed 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 of the latest weakness,” said Ole Hansen, an analyst at Saxo Bank.

BP shares fell 4.1 per cent, wiping £2.7 billion off their value, while Shell fell 4.6 per cent, reducing its value by £7.3 billion.

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

And the motoring organization said there was a chance prices could fall further.

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