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File photo of Saudi trader. The opening of the Saudi market, capitalized at about $530-billion, is one of the most keenly awaited economic reforms in the world’s biggest oil exporter.

Hassan Ammar/AP

West Texas Intermediate dropped to the lowest level in more than two years after Saudi Arabia reduced the cost of its oil to U.S. customers in the face of soaring North American output.

Futures tumbled 2.2 per cent in New York. Saudi Arabian Oil Co. cut prices for all grades to the U.S., the company said today in an e-mailed statement. The state-owned producer, known as Saudi Aramco, will sell Arab Light to clients in Asia for 10 cents less than Middle East benchmarks, down from a November discount of $1.05. U.S. crude imports from Saudi Arabia fell to a four-year low last month.

"The Saudi move speaks to them wanting to preserve market share in the U.S., where it has slipped recently," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. "It looks like the Saudis are comfortable with prices and demand."

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WTI for December delivery fell $1.76 to close at $78.78 a barrel on the New York Mercantile Exchange. It was the lowest settlement since June 28, 2012. Prices lost 12 per cent last month, the most since May 2012, and are down 20 per cent this year. The volume of all futures traded was 9.7 per cent above the 100-day average for the time of day.

Brent for December settlement declined $1.08 to $84.78 a barrel on the London-based ICE Futures Europe exchange. Futures dropped 9.3 per cent in October. Volume was 7.8 per cent lower than the 100-day average. The European benchmark crude traded at a $6 premium to WTI, compared with $5.32 on Oct. 31.

Market Share

Oil tumbled last month after Saudi Arabia, Iraq, Iran and Kuwait cut prices, leading to concern that OPEC members were fighting for market share. OPEC output rose to a 14-month high in October, according to Bloomberg estimates.

U.S. crude oil imports from the desert kingdom slipped to 609,000 million barrels a day the week ended Oct. 3, according to preliminary data from the Energy Information Administration. U.S. demand for imports has dropped as domestic output has surged. Crude output rose 0.4 per cent to 8.97 million barrels in the week ended Oct. 24, according to weekly EIA estimates that began in January 1983.

Oil has collapsed into a bear market as leading members of the Organization of Petroleum Exporting Countries resisted calls to cut production even amid signs of slowing global demand. Members of the group, which pumps about 40 per cent of the world's crude, are engaged in an internal "price war" as they seek to defend their share of an oversupplied market, Iraqi Oil Minister Adel Abdul Mahdi said last week.

OPEC Output

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OPEC pumped 30.974 million barrels a day last month, according to a Bloomberg survey of oil companies, producers and analysts.

U.S. refineries operated at 86.6 per cent of their capacity in the week ended Oct. 24, down 0.1 percentage point and the lowest level since March, according to the Energy Information Administration. Refiners schedule maintenance for September and October as they transition to winter from summer fuels.

December gasoline futures decreased 2.4 per cent to settle at $2.1176 a gallon on the Nymex. Ultra low sulfur diesel for December delivery slipped 1 per cent to $2.4899 a gallon.

Regular gasoline at U.S. pumps fell below $3 a gallon for the first time since December 2010 on Oct. 31. The average retail price dropped to $2.98 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation's biggest motoring group.

The dollar strengthened to an almost seven-year high versus the yen. A rising U.S. currency reduces the appeal of raw materials such as oil and gold as a store of value.

Money managers reduced net-long positions in WTI by 2.3 per cent in the week ended Oct. 28, data from the U.S. Commodity Futures Trading Commission showed. Long positions, or bets on rising prices, retreated to the lowest level in 17 months. Net– long positions for Brent rose 3.8 per cent to 54,715 contracts in the same period, according to data from ICE Futures Europe's Commitments of Traders report.

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