Crude has been weakened by fears that global demand will be hurt by trade tensions between the US and China, after prices hit a three-year high last month on prospects of a supply crunch
Oil retreated below $71 a barrel after Saudi Arabia was said to offer extra crude supplies to some customers as OPEC’s biggest producer plans to boost output, while the US is considering tapping into its emergency stockpiles to rein in prices.
Futures in New York slid as much as 0.8 percent, after falling 3.8 percent last week. Saudi Arabia offered additional cargoes of its Arab Extra Light crude to at least two buyers in Asia for August, people with knowledge of the matter said, after supplying full contractual volumes to customers in the region.
Meanwhile, the US government is said to be mulling the release of oil from the nation’s 660-million-barrel Strategic Petroleum Reserve.
Crude has been weakened by fears that global demand will be hurt by trade tensions between the US and China, after prices hit a three-year high last month on prospects of a supply crunch.
Investors are watching for signs that members of the Organization of Petroleum Exporting Countries and its partners are moving to fill any potential gaps in supply caused by renewed US sanctions on Iran, falling output in Venezuela and sporadic disruptions in Libya.
OPEC and its partners could increase production by more than the 1 million barrels a day agreed under a deal last month if needed, Russia’s Energy Minister Alexander Novak said.
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.
“Going forward, we may see OPEC members with the ability to ramp up output seek to grab more market share, whereas other nations such as Iran and Venezuela trying to stick to the agreement,” said Ahn Yea Ha, a commodities 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 a barrel.”
West Texas Intermediate crude for August delivery fell as much as 59 cents to $70.42 a barrel, and traded at $70.68 on the New York Mercantile Exchange at 12:26 p.m. in Seoul. Total volume traded was about 44 percent below the 100-day average. Prices dropped $2.79 to $71.01 last week.
Brent for September settlement lost 37 cents to $74.96 a barrel on the London-based ICE Futures Europe Exchange. Prices fell 2.3 percent last week. The global benchmark crude traded at a $5.36 premium to WTI for September.