An Aramco refinery in Saudi Arabia. Oil’s rally has reversed in the last couple of weeks on speculation the kingdom will pump more crude to compensate for lost Iranian barrels. Image Credit: Reuters

London: Oil traded near $62 (Dh228) a barrel as Saudi Arabia was said to give extra crude supplies to its customers in Asia but they’ll pay a heavy price for it.

Futures erased an earlier gain in New York to trade 0.7 per cent lower. Saudi Aramco will sell additional cargoes to customers in the world’s biggest oil-consuming region for June loading, according to people with knowledge of the matter. Crude ended Monday 0.5 per cent higher, in a day where prices were whipsawed between the US-China trade war and renewed American tensions with Iran.

Oil’s rally has gone into reverse in the last couple of weeks on speculation Saudi Arabia and other producers will pump more crude to compensate for lost Iranian barrels. American drillers have also boosted output to a record and nationwide stockpiles climbed to the highest since September 2017. Meanwhile, a deterioration in US-China trade relations is souring a demand outlook that had been improving over the last couple of months.

“The move is mostly Saudi-related,” says Warren Patterson, head of commodities strategy at ING Bank NV. “It seems to suggest that we will see Saudi production edging higher in the coming months, and shows that they will be there to help meet any shortfall from Iran.”

West Texas Intermediate crude for June delivery fell 43 cents, or 0.7 per cent, to $61.82 a barrel on the New York Mercantile Exchange at 10:59am in London. The contract has lost around 7 per cent since reaching the highest level in almost six months on April 23.

Brent for July settlement pared some earlier losses trading at $70.59 a barrel on the London-based ICE Futures Europe exchange. This was after falling as much as 76 cents, or 1.1 per cent, earlier. The contract settled 0.6 per cent higher at $71.24 on Monday. The global benchmark crude was at a premium of $8.64 to WTI for the same month.

Refiners in India are set to receive as much as 200,000 barrels a day of extra supplies from Saudi Arabia, people familiar with the matter said. While the extra supplies will alleviate a squeeze driven by US sanctions on Iran and Venezuela, the refiners face a costly bill. Aramco raised its official selling price for June cargoes of its flagship Arab Light crude to the biggest premium to Middle East benchmark prices in 11 months.

President Donald Trump’s top trade negotiator accused Beijing of back-pedalling on commitments it made during negotiations as he announced that tariffs would be raised. Still, Chinese Vice Premier Liu said he will visit the US for trade talks on Thursday and Friday, according to a statement on the website of China’s Ministry of Commerce.

— Bloomberg