Oil slides $2, lowest since 2010 on Saudi output signal

Brent oil prices fell more than $2 a barrel to less than $88 on Monday, its lowest since 2010, after key Middle East producers signaled they would keep output high even if that meant lower prices.

Brent oil prices have tanked by nearly 25 percent since June as ample supply coincided with weak demand, raising the possibility that the Organization of the Petroleum Exporting countries could cut output.

But Saudi Arabia has privately told oil market participants it can accept oil prices between $80 and $90 a barrel, sources briefed by OPEC’s biggest producer told Reuters.

Kuwait’s oil minister said on Sunday OPEC was unlikely to cut production to support prices. OPEC is due to discuss output at its next meeting Nov. 27.

“It suggests there’s some nervousness in the market that Saudis are seeking to bring pressure on the shale producers in the U.S.,” said Gene McGillian, an analyst at Tradition Energy.

“The market is in search of a bottom and we’re in the process of finding it, we just have to see what OPEC does and where the economy goes,” McGillian said.

Early on Monday, Brent crude touched its lowest since December 2010 at $87.74. But Brent pared losses, trading down $2.04 on the day at $88.17 by 11:12 ET (1512 GMT). U.S. crude was down $1.12 at $84.70.

Growth in China’s exports and imports trumped forecasts in September, and the world’s largest energy consumer increased crude oil imports by 9.5 percent from August, lending limited support to prices.

Consuming countries like China and India often build up stockpiles when prices are low.

Oil prices could be on the brink of sliding another $10 or more, some analysts said. They say a drop of more than 20 percent since June has wiped out key support levels and left behind a “technical graveyard.”

“If Brent closes below $88.49, I’m pretty certain that further downward pressure can be expected until the next significant level at $82.35,” said Tamas Varga, an analyst at brokerage PVM Oil Associates in London.

Iraq cut its November oil prices for customers in Asia and Europe on Sunday, following a similar move by Saudi Arabia last week.

Kuwait’s oil minister, Ali al-Omair, was quoted as saying by state news agency KUNA on Sunday that $76 to $77 a barrel might be the level that would end the oil price slide, since that was the cost of oil production in the United States and Russia.

“We are firmly entrenched in the bear market, not only in Brent, but also in WTI,” said Tariq Zahir, analyst at Tyche Capital Advisors. “I would be surprised if in the next month we break $80, barring a hurricane or ISIS [Islamic State of Iraq and Syria] going into the Southern part of Iraq."