Oil Futures Slide on Saudi Price Cut to U.S.

By Nicole Friedman And Summer Said 

The global oil benchmark slid to a fresh more-than-four-year low Thursday after Saudi Arabia cut the price of its oil in the U.S., reinforcing concerns that the kingdom is more concerned with maintaining market share than raising prices.

Oil prices have slumped for months as global supply growth, particularly from the U.S., has outpaced demand. The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is the biggest producer, decided last week to keep its production quota steady. The cartel has lowered production to raise prices in the past, and its decision to maintain its output target sent prices tumbling.

State-run oil company Saudi Aramco on Thursday lowered the January prices for its oil in the U.S. by between 10 and 90 cents a barrel. The company also lowered its prices to Asia and raised them for Northwest Europe and the Mediterranean.

"The Saudis are making it very clear that they're going to do whatever it takes to maintain market share," said Phil Flynn, analyst at the Price Futures Group in Chicago. "If it means taking prices to $60 a barrel or $50 a barrel, they're prepared to do whatever it takes."

Brent, the global benchmark, slid 28 cents, or 0.4%, to $69.64 a barrel on ICE Futures Europe, the lowest settlement since May 25, 2010.

U.S.-traded light, sweet oil for January delivery fell 57 cents, or 0.9%, to $66.81 a barrel on the New York Mercantile Exchange.

Saudi Arabia now believes oil prices could stabilize at around $60 a barrel, a level both it and other Gulf producers believe they could withstand, according to people familiar with the situation. That suggests the de facto OPEC leader won't push for supply cuts in the near term, even if oil prices fall further.

Another Saudi price cut to the U.S. is "tantamount to a declaration of war to U.S. shale-oil producers, in view of the significant decline in the price of the benchmark [U.S. oil]," said Commerzbank in a note. "U.S. shale-oil producers already find themselves confronted with very low prices."

U.S. oil production has soared above 9 million barrels a day for the first time in decades due to new technologies enabling producers to access supplies trapped in shale-oil fields. The U.S. Energy Information Administration said Thursday that the country's proven reserves of crude oil and condensate -- the resources that are recoverable with current technology and prices -- rose to 36.5 billion barrels in 2013, the highest level since 1974.

However, prices have fallen in recent months to levels that could threaten the viability of shale production. Some companies have already reduced capital expenditure plans for next year.

January reformulated gasoline blendstock, or RBOB, fell 1.22 cents, or 0.7%, to $1.7948 a gallon, the lowest level since Oct. 9, 2009.

January diesel fell 1.57 cents, or 0.7%, to $2.1177 a gallon, the lowest settlement since Sept. 23, 2010.

Write to Nicole Friedman at [e-mail] and Summer Said at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires