Oil dropped around 10% last week as European nations including Germany and France announced new lockdowns and daily virus cases hit a record in the U.S. While crude has since recovered most of those losses, the market continues to face headwinds, OPEC Secretary-General Mohammad Barkindo said.
The Organization of Petroleum Exporting Countries, led by Saudi Arabia, agreed with Russia and other producers in April to pump less oil to prop up the market. The supply cuts by the alliance, known as OPEC+, caused oil prices to rally, but benchmark Brent crude is still down 38% this year at $41 a barrel.
Brent will probably continue ranging between $38 and $43 a barrel, according to Ibrahim Al-Buainain, head of Aramco’s trading unit. That’s far below what most members of the cartel, including Saudi Arabia, need to balance their budgets.
Aramco cut prices for all U.S. grades by 20 cents and raised them by as much as $1 for the northwest Europe and Mediterranean regions. The company shipped almost two-thirds of its oil exports last month to Asia or the U.S., tanker-tracking data compiled by Bloomberg show.
OPEC+ is considering keeping production at current levels into 2021 instead of easing the supply cuts at the start of January, as was originally planned. With Europe’s lockdowns and refinery profits dwindling, even Aramco’s Al-Buainain doubts the market needs more crude.
The producers’ group will meet on Nov. 30-Dec. 1 to review its output policy.
Profits from processing crude into refined fuels have tumbled as the virus crushes demand for energy and travel. Aramco on Tuesday reported a third-quarter loss in its downstream business, which includes refining.
Saudi Arabia’s pricing decision usually sets the tone for other Middle Eastern suppliers, including Iraq and the United Arab Emirates, the second- and third-largest producers in OPEC.