Oil prices fall on Asian data, Saudi austerity plan

A Saudi employee fills the tank of his car with petrol at a station on Dec 28.
A Saudi employee fills the tank of his car with petrol at a station on Dec 28.PHOTO: AFP

NEW YORK (AFP) - Oil prices fell Monday (Dec 28) following downcast economic data from China and Japan and a Saudi budget plan that suggested the petroleum-exporting giant is planning for oil prices to stay low.

US benchmark West Texas Intermediate for February delivery fell US$1.29 to US$36.81 a barrel on the New York Mercantile Exchange.

Brent North Sea crude for February delivery shed US$1.27 to US$36.62 a barrel in London.

Analysts cited weak data from major petroleum buyers China and Japan as aborting the oil market's upward turn last week, which lifted the US benchmark contract three days in a row.

Chinese industrial profits declined 1.4 per cent in November, and in Japan, industrial production fell 1.0 per cent in November from a month earlier, a bigger slowdown than expected.

Analysts also cited a Saudi plan to cut fuel and utility subsidies in response to a record budget deficit prompted by diving oil prices. The moves will lift domestic gasoline prices by more than 50 per cent on some products.

John Kilduff, founding partner at Again Capital, said the policy implies that Riyadh expects low oil prices to persist.

"They're in this for the long haul," Kilduff said of the Saudi strategy to keep prices low to chase out of the market high-cost production from the US and elsewhere.