US oil prices fall below $80 a barrel
HOUSTON — The benchmark American oil price fell below the symbolic $80-a-barrel threshold on Monday, swooning to two-year lows, after Saudi Arabia aimed to shore up its dwindling exports to the United States by cutting its selling price for the American market.
The Saudi move and the deepening fall in oil prices are both symptoms of the oil-drilling boom in the United States, which has lifted production by more than 70 percent over the last six years and reduced the nation’s imports from OPEC producers to roughly half of what they once were.
The lower oil prices are bringing relief to consumers at the pump in time for the holiday shopping season. The national average price for regular gasoline has fallen below $3 a gallon for the first time in four years, and experts say it could easily drop 25 cents more over the next month.
A sustained drop in oil prices could also eventually affect investments in domestic drilling. Most analysts do not think the rise in domestic oil production — an increase totaling more than a million barrels a day over the last year alone — will be interrupted anytime soon unless the American benchmark drops to $70 a barrel and stays there for several months. Then less efficient or highly indebted smaller producers would probably have to slow drilling in at least some fields.
The cut in Saudi prices for various grades of crude to the United States was modest — roughly 45 cents a barrel. But the move was viewed by many energy experts as a sign that the kingdom was trying to compete with American oil to protect its market share.
Saudi Arabia considers its relationship to the United States to be a cornerstone of its foreign policy and its security, and it is a partner with Royal Dutch Shell in owning several refineries on the Gulf of Mexico coast — in part to assure that the Persian Gulf kingdom will remain an important supplier to the American market.
The price cut came as Saudi Arabia raised its selling prices in Asia, confusing many experts about its intentions. The move in Asia reversed Saudi cuts in oil prices there in recent months to compete with oil from Nigerian and other African suppliers, which helped push down world prices early last month.
Saudi Arabia has been competing vigorously in Asia against an influx of African oil that had once been pumped for the American market. That oil has recently been pushed almost completely out of the American market because of the increased United States production of similar grades of shale oil.
Several oil analysts said the reaction to the Saudi move, which many characterized as otherwise modest, demonstrated the skittishness of commodity traders over the slowing European and Asian economies.
The West Texas Intermediate benchmark price had been moving modestly higher in the early part of the day until the new Saudi prices were reported. Light, sweet oil for delivery in December quickly fell $1.76, to $78.78 a barrel on the New York Mercantile Exchange, a decline of more than 2 percent. It was the lowest settlement price recorded since June 2012.