Why oil prices have plunged 3% today

• Saudi Arabia is committed to boosting oil output in December, the FT reported.
• The kingdom is resigning itself to a period a lower prices, sources told the FT.

A report that Saudi Arabia would ditch its unofficial crude price target sent crude oil prices sharply lower on Thursday.

According to sources that spoke with the Financial Times, the kingdom will no longer seek a $100 per barrel price and is instead ready to increase oil output.

Speculation has mounted over what the world's largest oil exporter may do. Even as Saudi Arabia and other OPEC+ members have progressively cut oil output to prop up global pricing, waning demand pushed crude to its lowest level since 2021 earlier this month.

Despite this, those familiar with the matter said that Riyadh is prepared to boost output as scheduled on December 1. In essence, the kingdom is giving in to lower prices, FT sources said.

Markets spiraled on the news, dropping over 3%. Brent crude, the international benchmark, fell as low as $70.7 as of 11:00 am ET. An even steeper decline hit US West Texas Intermediate, hitting $67 a barrel.

The kingdom's decision may seem counterintuitive, as the $100 per barrel threshold is considered essential to financing the Saudi budget. Yet, sources told FT that Riyadh is no longer comfortable ceding its market share to other producers by limiting production.

OPEC's joint efforts to support higher prices have also been made difficult by the fact that some coalition members have partially disregarded the restrictions. One source told FT that, if countries such as Iraq and Kazakhstan do not commit to curbing supply, Riyadh may unwind its own cuts quicker than expected.

Under the current plan, Saudi Arabia will boost its monthly production by 83,000 barrels per day each month from December.

Prices have stayed low as China, a key consumer of global oil, has signaled a lackluster appetite for the commodity.

According to Bloomberg, developments in Libya also added to Thursday's oil plunge.

The country agreed to appoint a new central bank governor, ending a deadlock between rival administrations. The eastern-based faction has committed to reopening the country's oil fields in response, a move that could bring more crude output back online.