Oil Plunges Most in 11 Months as Saudis Hint Taps Will Open Up
(Bloomberg) -- Oil prices fell the most in 11 months in New York as Saudi Arabia said it expects OPEC and its partners to boost supplies later this year, easing restraints intact since early 2017.
U.S. futures were down 4 percent, the biggest drop since July 5, after Saudi Arabia Energy Minister Khalid Al-Falih said the supply caps may be scaled back, though he added that no decision has been made. The $2.83 decline pushed the price below $70 at the close of trading for the first time since May 8.
The potential for an OPEC policy change, following U.S. President Donald Trump’s tweet complaining about high prices, scrambled the outlook for oil markets and undercut the stock prices of producers. The S&P 500 Energy index dropped 2.7 percent.
“We’re starting to see growing concerns that producers could cut back on their output cuts,” said Gene McGillian, market research manager at Tradition Energy, in a telephone interview. “Taking that into consideration along with record U.S. production levels, it’s triggered a nice amount of profit taking."
Explorers in the U.S. shale patch, meanwhile, were seen resuming their expansion plans this week as they continue to find a home for their crude around the world. U.S. working oil rigs rose by 15 this week to 859, the highest level since March 2015 and the biggest weekly boost since February, according to data from Baker Hughes.
"We’ve been having plenty of exports to kind of alleviate any sort of glut here," said Ashley Petersen, lead oil analyst at Stratas Advisors in New York. "There seems to be just enough crude and it’s all finding a home to go to.”
The Saudi oil minister made his pronouncement on the supply cuts at a meeting in St. Petersburg with his Russia counterpart, Alexander Novak, who echoed the comments. The two ministers plan to meet at least twice more before an OPEC gathering in Vienna next month, the Saudi minister said.
Oil has traded near a 3 1/2-year high on concern about supply disruptions from Venezuela and Iran. The rally has sparked worries that demand may falter, and the Organization of Petroleum Exporting Countries and its allies appear to be reacting to that idea with the first offer to boost output since January 2017.
West Texas Intermediate for July delivery fell $2.83 to settle at $67.88 a barrel on the New York Mercantile Exchange. The contract lost 1.6 percent to $70.71 on Thursday. Total volume traded was about 35 percent above the 100-day average.
Brent futures for July settlement fell $2.35 to $76.44 a barrel on the London-based ICE Futures Europe exchange, the first weekly drop in seven weeks. The global benchmark crude traded $8.55 above WTI for the same month, the biggest premium in more than three years.
Futures for September delivery fell 1.6 percent to 477.4 yuan a barrel in afternoon trading on the Shanghai International Energy Exchange. Prices are down 1.9 percent this week. The contract rose 0.1 percent to 485 yuan on Thursday.
Trump’s April 20 gave voice to a concern held widely in the U.S. and other consuming countries that oil’s rally from less than $30 in early 2016 to more than $70 in New York risked becoming a threat to global economic growth. It also came ahead of the U.S. Memorial Day holiday weekend, when high gasoline prices will be at issue.
Other oil-market news:
The world’s top oil trader, Vitol Group, said it will be near impossible to avoid U.S. sanctions on Iran, suggesting U.S. President Donald Trump’s attack on OPEC’s third-largest producer may have a bigger impact on the global crude market than many anticipate. The rise in oil prices to $80 a barrel is starting to cause concern across boardrooms, with some big industrial consumers, including airlines and shipping companies, starting to buy more insurance against rising energy prices. Andurand’s oil hedge fund to turn investors away from June The world’s largest oil exporter just made a policy swerve, moving from advocating higher prices to trying to stop the rally Gasoline futures in New York were set for the first weekly decline since early May, and traded at $2.1917 a gallon.
With assistance from Tsuyoshi Inajima, Grant Smith, Sharon Cho and Robert Tuttle. To contact the reporters on this story: Catherine Ngai in New York at cngai16@bloomberg.net; Robert Tuttle in Calgary at rtuttle@bloomberg.net. To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Christine Buurma.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Gunvor CEO Sees Russian Refining Capacity Taking Hit from Drone Strikes
- These Factors Helped Brent Oil Price Break Above $85
- Sinopec Engineering Posts Higher Annual Petrochemicals Revenue
- Imperial Pipeline in Winnipeg Goes Offline for Three Months
- Gaz System to Acquire Gas Storage Poland
- Subsea7 Secures Contract to Service Woodside's Trion
- Adnoc Inks Supply Deal for Ruwais LNG Project with Germany's SEFE
- EIA Boosts USA Crude Oil Production Forecasts
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension