Saudi Arabia’s action aims to support the market amid a seasonal drop in demand and concerns about supply overhang

Major oil producer Saudi Arabia has cut the February price of crude for buyers in all regions, Reuters and Bloomberg reported on Sunday, citing a company statement.

According to the reports, state producer Saudi Aramco has slashed its flagship Arab Light crude oil price to Asia, the country’s main market, by $2 to $1.50 a barrel above the benchmark, its lowest level in 27 months. The company also reduced oil prices for February delivery to northwestern Europe, the Mediterranean, and North America.

The move comes ahead of the traditional February and March slump in oil consumption, which analysts say may further increase the build-up in oil inventories that has worried market participants for months.

The situation already forced the OPEC+ group of major oil-producing countries led by Russia and Saudi Arabia to take a series of steps in recent months to support crude prices and help stabilize the global oil market, which had a volatile year due to the Western sanctions on Russia and, more recently, the Israel-Hamas war. The most recent action involved significant output cuts (around 2.2 million barrels per day) which the group agreed last month to extend into the first quarter of 2024.

READ MORE: OPEC+ to extend oil output cuts

Oil prices fell by more than 1% on Monday following Saudi Arabia’s announcement. Global benchmark Brent crude dropped 1.21% to $77.80 a barrel at around 07:30 GMT, and US benchmark West Texas Intermediate slipped 1.35% to $72.81 a barrel.

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