London: Oil retreated below $70 (Dh257) a barrel as Saudi Arabia was said to offer extra crude to some customers, while the US was said to consider tapping emergency supplies to offset losses elsewhere.
Futures in New York slid 2 per cent after falling 3.8 per cent last week. Saudi Arabia offered additional cargoes of its Arab Extra Light crude to at least two buyers in Asia, people familiar with the matter said. Meanwhile, the US, which is seeking to choke off crude exports from Iran, is said to be mulling a release from its 660 million-barrel Strategic Petroleum Reserve.
Prices are retreating from the three-year high hit last month as Saudi Arabia and its allies move to counteract supply losses elsewhere in the Organisation of Petroleum Exporting Countries. They have pledged to offset the supply impact of the spiralling crisis in Venezuela, erratic flows in Libya and renewed US sanctions on Iran. Oil is also slipping on concern that trade tensions between the US and China will hurt demand.
“There is no shortage of bullish news items on the supply side, but they are maybe being trumped by the talk of the president tapping the US SPR to keep oil prices down this summer,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London.
West Texas Intermediate crude for August delivery fell 2 per cent to $69.56 a barrel on the New York Mercantile Exchange at 8:23am. Total volume traded was in line with the 100-day average. Prices dropped $2.79 to $71.01 last week.
Brent for September settlement was down $1.92 at $73.41 a barrel on the London-based ICE Futures Europe Exchange, and traded at a $5.05 premium to WTI for the same month. Prices for the global benchmark crude declined 2.3 per cent last week.
In Libya, crude production at its biggest field is set to drop by about half after authorities shut wells for safety following the armed abduction of workers at the Sharara deposit, according to the National Oil Corp. While the African nation lifted force majeure at its western El-Feel field and resumed shipments from eastern oil ports last week, supply disruptions like the one at Sharara complicate efforts by Opec, of which Libya is a member, to pump more crude.
Russia’s Energy Minister Alexander Novak said Opec and its partners could, if necessary, increase production by more than the 1 million barrels a day pledged last month. Still, the group’s Gulf members may need to pump almost as much oil as they can to cover swelling output losses, according to the International Energy Agency.
“We may see Opec members with the ability to ramp up output seek to grab more market share,” while others such as Iran and Venezuela resist, said Ahn Yea Ha, an analyst at Kiwoom Securities Co. “It’s unclear whether the US will actually use the emergency inventories, but we can at least tell that they feel a lot of pressure from crude trading above $70.”