New York: Oil retreated before weekly US inventory data even as the disappearance of a journalist from Saudi Arabia threatened to spark a diplomatic crisis.
Brent for December settlement dropped 0.5 per cent to $80.35 a barrel on the London-based ICE Futures Europe exchange, after gaining 0.4 per cent on Monday. The global benchmark crude traded at a $9.14 premium to West Texas Intermediate (WTI) for the same month.
Crude in New York dropped 0.6 per cent. US stockpiles probably rose by 1.25 million barrels last week, the longest streak of gains since March 2017 if confirmed by government data on Wednesday.
WTI for November delivery fell as much as 76 cents to $71.02 a barrel on the New York Mercantile Exchange, and was at $71.37 at 8.18am local time. The contract climbed 44 cents on Monday. Total volume traded on Tuesday was about 12 per cent below the 100-day average.
“Shale oil production continues unabated in the US,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. At the same time, “the case of [Jamal] Khashoggi also keeps the oil market on tenterhooks”.
Saudi Arabia this week appeared to make a veiled threat to use the kingdom’s oil wealth as a political weapon as it vowed to retaliate against any punitive measures linked to the disappearance of Washington Post columnist Khashoggi. That resulted in the world’s biggest crude exporter joining Iran, where US sanctions kick in next month, in Goldman Sachs Group’s list of political risks for the oil market.
Investors are watching for any signs that Saudi Arabia will deploy oil as a weapon. On Monday, Saudi Energy Minister Khalid Al Falih said the kingdom continues to be a responsible supplier. He emphasised that the nation will keep using its spare production capacity to cushion the market against any supply shocks.