U.S crude oil fell on Thursday as the debate for a sustainable price level continued after Saudi Arabia announced deep discounts for the crude it sells to Asian and U.S. buyers in an apparent attempt to defend its market share.
U.S. crude settled 57 cents lower at $66.81 a barrel. Meanwhile, benchmark North Sea Brent crude was last down about 30 cents at $69.75 a barrel, after trading in a wide band of nearly $2.
News that Libya's El Sharara oil field, one of OPEC's largest, might be ready to resume output after a pipeline blockage was cleared also weighed on sentiment in an oversupplied market. The El Sharara produced 300,000 barrels per day before it closed last month after clashes between armed groups.
Losses in oil and other dollar-denominated commodities were capped, however, by a weaker U.S. dollar against the euro amid uncertainties on whether the European Central Bank would introduce fresh stimulus into the euro zone economy.
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Saudi Arabia's state-owned oil company cut the January price of its Arab Light grade for Asian customers by $1.90 a barrel from December to a discount of $2 a barrel to the Oman/Dubai average.
The Arab Light Official Selling Price to the United States was set at a premium of 90 cents a barrel to the Argus Sour Crude Index for January, down 70 cents from the previous month.
Saudi Arabia was key in blocking the Organization of the Petroleum Exporting Countries last week in reducing output to support prices. It argued that low prices would instead force U.S. shale oil producers, who have flooded the market, to cut back.
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"This is the second salvo in the OPEC price war, a new offensive by the Saudis," said Phil Flynn, analyst at the Price Futures Group in Chicago.
More than 30 economists and analysts polled by Reuters after OPEC's Nov. 27 meeting forecast an average Brent price of $82.50 a barrel in 2015, down $11.20 from the previous poll. This was the biggest downgrade in average forecasts since the global economic crisis in 2008.
Fellow OPEC member Nigeria has lowered its oil price budget assumption by 11 percent to $65 a barrel for 2015, down from $73.