Crude advances after Saudi restraint sparks renewed supply fears
Crude closed at the highest in a week after Saudi Arabian production cuts heightened concerns about tightening worldwide supplies.
As Bloomberg writes in the article Crude advances after Saudi restraint sparks renewed supply fears, futures in New York advanced 0.8 percent on Monday. OPEC’s largest producer curbed output last month, according to OPEC delegates, despite Energy Minister Khalid al-Falih pledge to add about 1 million barrels to forestall any shortages. Labor strikes also resumed in the North Sea, fueling worries about an additional supply hitch.
“Reports that the Saudi output in July had dropped, seemed to catch a bid in the market,” said Gene McGillian, manager of market research at Tradition Energy. The U.S. benchmark crude hasn’t recovered from a July retreat triggered by the U.S.-China trade spat that imperiled demand for energy in the world’s biggest economies. Despite Saudi Arabia reducing oil output last month, investors are waiting for clearer indications of the global supply situation after Russia’s largest oil producer said it has the capacity to continue lifting production.
“Are we going to continue to see strong demand growth and only the barrels that the Russians and Saudis put on really making up for what is lost through Iran and Venezuela?” said McGillian. “That continues to point towards a tight fundamental picture.”
West Texas Intermediate crude for September delivery rose 52 cents to settle at $69.01 a barrel on the New York Mercantile Exchange. Total volume traded was about 38 percent below the 100-day average. Brent for October settlement added 54 cents to end the session at $73.75 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $5.81 premium to WTI for the same month. Meanwhile, the strengthening U.S. dollar eroded some of crude’s rally during the session. The Bloomberg Dollar Spot Index rose as much as 0.3 percent.
Saudi Arabia pumped 10.3 million barrels a day in July, according to the delegates, down from the 10.489 million the kingdom reported to the cartel for June.
Saudi Arabia may be having “a hard time getting the marginal barrel out of the sand,” said Bill O’Grady, chief market strategist at Confluence Investment Management LLC in St. Louis. The decrease in output might not have been intentional, he said. Meanwhile, the Trump administration moved to restore some U.S. sanctionson Iran and reaffirmed plans to impose tougher penalties on the Islamic Republic’s oil sales in November. Iranian President Hassan Rouhani said in a televised address that Iran is open to talks with the U.S., but not under sanctions.