Saudi Aramco is returning most of its domestic oil refineries to full capacity after cutting back on processing to meet the crude demands of customers
Oil edged lower on signs Saudi Arabia is making progress in restoring lost output even as uncertainty remains about the kingdom’s ability to meet its timeline of a full return by the end of the month.
Futures dropped 0.4% in New York after rising 1% on Monday. Saudi Aramco is returning most of its domestic oil refineries to full capacity after cutting back on processing to meet the crude demands of customers, according to people familiar with the matter. US stockpiles probably declined by 600,000 barrels last week, a Bloomberg survey showed.
Oil is heading for the biggest monthly gain since June following the attacks that took out 5% of global supply and spurred a record spike in prices. The US, France and the UK have all blamed Iran for the strikes, with the Americans moving more weapons and troops to Saudi Arabia. While the kingdom has reiterated its commitment to restore output to pre-attack levels by the end of September, some analysts and consultants are sceptical about that target.
“As repairs proceed and optimism starts rising, oil may be pressured downwards again,” said Howie Lee, a Singapore-based economist at Oversea-Chinese Banking Corp. Still, scepticism about how quickly Saudi Arabia’s production will return is likely to keep prices supported, he said.
West Texas Intermediate for November delivery dropped 23 cents to $58.41 a barrel on the New York Mercantile Exchange as of 11:37 a.m. Singapore time after falling as much as 0.7% earlier. The contract gained 55 cents to settle at $58.64 on Monday.
Brent crude for November slipped 29 cents, or 0.5%, to $64.48 a barrel on the ICE Futures Europe Exchange. The contract closed at $64.77 on Monday, up 0.8%. The global benchmark crude traded at a $6.07 premium to WTI.
State-run Saudi Aramco reduced refinery run rates by 1 million barrels a day after the attacks to make more crude available for export. The kingdom’s oil inventories are down 8.4% since the strike, according to Orbital Insight.
If Energy Information Administration data Wednesday confirms the expected decline in U.S. crude stockpiles, it would be the fifth weekly draw in six weeks. Inventories rose by 1.1 million barrels to 417.1 million barrels in the week ended Sept. 13, according to the EIA.