Oil near 5-year low of $68 a barrel as Saudi Arabia cuts prices

Oil prices fell to the lowest close in more than five years of around $68 a barrel, after Saudi Arabia offered customers in Asia the biggest discount on record for its crude, boosting speculation it's defending market share.

Saudi Arabia, the largest producer and exporter in the Organisation of the Petroleum Exporting Countries (OPEC), steeply cut its January oil prices for Asian and US buyers on Thursday, a week after refusing to support OPEC output cuts.

Saudi Arabia's Aramco cut the January Official Selling Prices (OSPs) 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 OSP 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.
 
Arab Light OSPs to Northwest Europe were raised by 20 cents for January from the previous month to a discount of $3.15 a barrel to the Brent Weighted Average (BWAVE).
 
In today's trading, Brent for January settlement slid 74 cents to $68.90 a barrel on the London-based ICE Futures Europe exchange and was at $68.96 at 12:05 pm local time, the lowest since October 2009. The European benchmark crude traded at a premium of $2.81 to WTI, compared with $4 on 28 November.

On Thursday, Brent crude prices declined modestly to trade below $70 per barrel.

Saudi Arabia and other rich Gulf producers last week blocked proposals from poorer OPEC members, such as Venezuela and Algeria, to cut output to support oil prices, which have plummeted by over a third since June.
 
OPEC sources have said Saudi oil minister Ali al-Naimi told the OPEC ministerial meeting held behind closed doors that OPEC should defend its market share as production cuts would only boost rival producers, including US shale oil.
 
According to sources, Naimi also didn't give any indication how far prices would need to fall for Saudi Arabia to consider cutting production.

Saudi's strategy is to block more than $150 billion of oil projects that are to come up in 2015, including Canada's oil sands projects. With oil available cheap in the market, these projects which require expensive and complex extraction techniques, are the most unlikely to go ahead.