Oil drops on Saudi price cut

Oil dropped as the debate over pricing continued after Saudi Arabia announced deep discounts for the crude it sells Asian and US buyers in an apparent attempt to defend market share.

News that Libya’s El Sharara oil field, one of OPEC’s largest, might be ready to resume output once a pipeline blockage is cleared also weighed down sentiment in an over supplied market. El Sharara produced 300,000 barrels per day before it closed last month following clashes between armed groups.

Even so, losses in oil and other dollar-denominated commodities were capped by a weaker U.S. dollar against the euro amid uncertainties on whether the European Central Bank would introduce new stimulus into the euro zone economy.

Crude’s benchmark North Sea Brent settled down 28 cents at $69.64 a barrel, after trading in a band of nearly $2. U.S. crude finished down 57 cents at $66.81, having fallen to 66.09 earlier.

Saudi Arabia’s state-owned oil company cut the January price for its Arab Light grade for Asian customers by $1.90 a barrel from December to a discount of $2 a barrel to the Oman/Dubai average.

The Arab Light Official Selling Price to the United States was set at a premium of $0.90 a barrel to the Argus Sour Crude Index (ASCI) for January, down 70 cents from the previous month.

Saudi Arabia was key in blocking the Organization of the Petroleum Exporting Countries from reducing output to support prices. It argued that low prices would instead force US shale oil producers, who have flooded the market, to cut back.