London - Oil prices hit their lowest level since June 2012 on Thursday, dropping below $93 (R1,040) a barrel, as official oil price cuts from top producer Saudi Arabia added to supply glut worries and weak global economic data.
Oil declined together with European stocks ahead of a European Central Bank meeting on Thursday, as investors are waiting to see if Bank chief Mario Draghi's asset purchase plan can inject confidence into the euro zone economy.
Sharp cuts in official selling prices from state producer Saudi Aramco to Asian customers on Wednesday came as the clearest sign yet that the world's largest exporter is trying to compete for crude market share, amplified supply concerns.
“This is a structural change in the oil market, with Saudi Arabia explicitly stating that they are willing to compete on price,” said Bjarne Schieldrop, chief commodities analyst at SEB in Oslo.
“I think Brent will fall below $88 before we see the bottom of the market.”
Brent oil for November delivery lost $1.30 at $92.86 a barrel by 10:17 SA time.
It went as low as $92.57 a barrel in early trade, a fresh low from June 2012.
US November crude lost $1.10 to reach $89.63 per barrel, a 17-month low.
Oil production in Russia increased by almost 0.9 percent month-on-month in September to 10.61 million barrels per day (bpd), Energy Ministry data showed, adding to a glut from growing US and OPEC production that has held Brent crude prices below $100 a barrel for more than three weeks.
Data on Wednesday showed disappointing European factory data, and China's manufacturing sector in September remained subdued.
US economic strength, a rare bright spot for global markets, showed signs of caution following worries of an Ebola outbreak.
With oil prices continuing to slide, the pressure is building on the Organization of the Petroleum Exporting Countries (OPEC) to reduce output at its meeting next month.
While analysts expect OPEC to adjust the group's output target of 30 million barrels per day (bpd) for 2015, the actual cut may not be big enough to spur a bounce in oil prices.
SEB's Schieldrop said OPEC would need to cut around 1-1.5 million barrels a day in production in order to balance the markets in 2015. - Reuters