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Oil Prices Slump By Over 1% Amid Rise in Output

Oil prices slumped by over 1% on Monday after Saudi Arabia introduced sharp price cuts and output increased among OPEC+ members at large. Amid rising competition with rival producers, Saudi Arabia decided to cut the February official selling price (OSP) of its flagship Arab Light crude to Asia, lowering the price to its lowest level in 27 months.

Brent crude prices declined by 0.93%, or 73 cents, to $78.03 per barrel, while U.S. West Texas Intermediate crude futures slumped by 1.04%, or 77 cents, to $73.04 a barrel. This is a sharp turn after both contracts rose by over 2% during the first week of the new year.

“If we were just to focus on the fundamentals including, higher inventories, higher OPEC/non-OPEC production, and a lower-than-expected Saudi OSP, it would be impossible to be anything other than bearish crude oil,” IG analyst Tony Sycamore observed, suggesting that prices should continue to fall. Vandana Hari, founder of oil market analysis provider Vanda Insights, observed that rising output and market competition threaten to exceed demand, placing downward pressure on prices.

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