Oil extends gain near US$70
Saudi Arabia vow not to oversupply market
SEOUL: Oil extended gains near US$70 a barrel after Saudi Arabia signalled it won’t export oil beyond its customers’ needs, dispelling fears that it may flood the market.
Futures in New York rose 0.9% after gaining 2.1% in the previous three sessions.
Opec’s de facto leader Saudi Arabia, which has been under pressure from US President Donald Trump to pump more and ease prices, said exports this month would be “roughly equal” to June, and they would drop by 100,000 barrels a day in August.
Crude has retreated by almost 6% this month as the prospect of a tit-for-tat trade war between the United States and China rattled global financial markets.
The US oil benchmark closed above its 50-day moving average on Thursday after slipping below that level earlier this week, while worries over potential supply losses in Venezuela and Iran as well as sporadic disruptions in Libya linger.
“While Saudi Arabia is under pressure from Trump to keep oil prices low, it probably won’t like them to be too low at the same time,” said Hong Sungki, a commodities trader at NH Investment & Securities Co in Seoul.
“If it replaces the lost volumes from Iran and Venezuela, overall supplies will eventually be balanced.”
West Texas Intermediate crude for August delivery, which expires Friday, climbed as much as 1% to US$70.12 a barrel on the New York Mercantile Exchange and traded at US$70.06.
Prices are down 1.3% this week, heading for a third weekly decline.
Total volume traded was about 32% below the 100-day average.
The more-active September contract rose 0.4% to US$68.53.
Brent for September settlement added 31 US cents to US$72.89 on the London-based ICE Futures Europe exchange.
Prices on Thursday dropped 32 US cents to US$72.58.
The contract is down 3.2% this week. The global benchmark traded at a US$4.37 premium to WTI for the same month.
Futures for September delivery gained 1.5% to 493.4 yuan a barrel on the Shanghai International Energy Exchange, after rising 1.4% in the past two sessions.
“WTI will likely be buoyed above US$65 and Brent above US$70 for a while, but as uncertainties remain over the trade dispute between the United States and China, we’ll continue to have some downward pressure,” NH Investment & Securities’ Hong pointed out.
Saudi Arabia’s pledge to keep its crude production steady from June to July follows an agreement last month between Opec and its partners including Russia to boost production by one million barrels a day.
Holding production steady would mean shipping less crude than Saudi Arabia indicated after the Opec deal.
The kingdom initially planned record output of 10.8 million barrels a day, people briefed on output policy said in June.
Prices had gained earlier after the Energy Information Administration reported gasoline held in US storage tanks dropped last week by the most since May on the back of strong fuel demand, countering a surprise gain in nationwide crude inventories.
Decline in refinery utilisation rates, as well as oil exports that had dropped last week to the lowest level since April, contributed to the inventory build.
Oil-market news
Oil exports from Opec will decline to 24.38 million barrels a day in the four weeks ending Aug 4 compared with the period that ended July 7, according to tanker-tracker Oil Movements.
A potential deal between Saudi Arabia’s state-owned oil and petrochemical giants could enable the country’s sovereign wealth fund to raise billions of dollars it had hoped to collect from Aramco’s stalled initial public offering.
Gasoline futures are down 2.6% this week to US$2.0525 a gallon, heading for a third consecutive weekly drop.
While Saudi Arabia is under pressure from Trump to keep oil prices low, it probably won’t like them to be too low at the same time.
Hong Sungki