Oil drops after Saudis tell OPEC they reversed some output cuts
Oil reversed earlier gains after Saudi Arabia told OPEC it raised output back above 10 MMbpd in February, reversing about a third of the cuts it made the previous month. Futures fell 0.6% in New York after losing 9.2% the previous six sessions. The kingdom, which had curbed supplies more than it needed in January to lead the way in an accord to re-balance world markets, told OPEC it boosted production by 263,300 bpd last month, a figure that jarred with the group’s own estimate that Saudi production fell further.
Oil last week broke below $50/bbl for the first time since December as rising U.S. supply counteracted reductions by members of OPEC and 11 other nations that started Jan. 1. The Saudi production increase comes as Energy Minister Khalid Al-Falih last week said the kingdom won’t indefinitely “bear the burden of free riders.” Russia, Iraq and the United Arab Emirates are yet to deliver all the curbs they promised. WTI for April delivery was at $48.13/bbl on the NYME, down $0.27, in London. Total volume traded was about 18% below the 100-day average. The contract fell $0.09 to $48.40 on Monday, the lowest close since Nov. 29.
U.S. crude stockpiles probably increased by 3 MMbbl for a 10th week of gains, according to a Bloomberg survey before data from the EIA on Wednesday. Extending OPEC’s cuts will accelerate the re-balancing of the market and help prices to return to “acceptable” levels, Kuwait’s Oil Minister Issam Almarzooq said, according to the official news agency Kuna. OPEC producer Iraq will seek to boost output to 5 MMbpd by the end of the year, Iraq Oil report said, citing an interview with Oil Minister Jabbar Al-Luaibi.
Brent for May settlement was $0.23 lower at $51.12/bbl on the London exchange. The Brent benchmark traded at a premium of $2.47 to May WTI. At 10.011 MMbpd, Saudi output is still below the ceiling of 10.058 MMbpd imposed by the agreement, according to the OPEC report. Production data that the group derives from external sources, such as news agencies, showed Saudi output falling by 68,100 bpd to 9.797 MMbpd. The group as a whole got closer to full implementation of the cutbacks, with output falling in February by 139,500 bpd to 31.958 MMbpd.