Oil drops amid conflicting reports

LONDON: Oil f ell as t raders weighed conflicting reports on whether Saudi Arabia will succeed in restoring its lost production by the end of this month, while concerns over demand returned following gloomy European data.

Brent crude fell 0.3%, reversing earlier gains. Saudi Arabia, which has reiterated it will bring back all lost production following attacks on its oil facilities this month by the end of September, is on course to fulfil the promise, Reuters reported. Earlier, the Wall Street Journal said repairs at damaged plants may take many months, and consultants Rystad Energy and FGE are skeptical about the kingdom achieving its target.

The market is being pulled in different directions even as geopolitical tensions mount in the Middle East. Iran’s Foreign Minister Mohammad Javad Zarif refused to rule out war following plans for increased US troops and weapons in Saudi Arabia, he said in an interview with CBS. On the other hand, manufacturing and services numbers for the euro zone came in far short of estimates on Monday, highlighting concerns over the economy and oil demand.

“It’s tug of war between weak demand fundamentals and heightened geopolitical risks,” said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen.

Brent crude for November declined 17 cents to $64.11 a barrel on the ICE Futures Europe Exchange as of 1:59 p.m. in London, and traded at a $6.12 premium to West Texas Intermediate.

WTI for November delivery was little changed at $58.10 a barrel on the New York Mercantile Exchange, after climbing 5.9% last week.

The attacks set off an unprecedented flurry of activity in the oil futures markets last week, with both Brent and WTI contracts setting records in weekly aggregate volume with more than 17.2 million contracts traded.

Saudi Arabia has said Iran “unquestionably sponsored” the attacks and the UK said the Islamic Republic was “very likely” behind the strikes which knocked out about 5% of global supply and led to the biggest price spike on record.

Iran’s response has been a mix of defiance and an attempt to ease the tension. President Hassan Rouhani said on Sunday the Persian Gulf nation would lay out a peace initiative for the region at the UN General Assembly that would involve a coalition of regional and foreign countries, while Zarif said “I’m not confident that we can avoid a war.”