Oil fell on signs Saudi Arabia wants another major production increase, raising expectations that a glut of crude will form this year.
West Texas Intermediate slid 0.9% to settle below $63 a barrel, paring losses of almost 2% after Bloomberg News reported that the de facto OPEC leader is open to additional significant output hikes in a bid for market share. The kingdom wants the group to add at least 411,000 barrels a day in August and potentially September, ideally as quickly as possible to take advantage of peak summer demand, according to people familiar with the matter.
The cartel’s intentions have already been well telegraphed, despite the market’s knee-jerk reaction, said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.
“Still, it shows the course that OPEC is currently on will likely continue,” she added.
The development helped jolt crude out of a listless trade on mixed demand data. US government figures showed the country’s crude stockpiles fell 4.3 million barrels last week, raising expectations of near-term tightness. Meanwhile, gasoline demand declined.
Oil rose at the start of the week after a decision by OPEC+ to raise production in July was in line with expectations. Saudi Arabia led increases in OPEC oil production last month as the group began its series of accelerated supply additions, according to a Bloomberg survey. Nevertheless, the hike fell short of the full amount the kingdom could have added under the agreements.
Saudi Aramco, meanwhile, cut its oil prices to Asia after OPEC+ continued with its outsized output increases for a third month. The decrease is smaller than a 35-cents-a-barrel reduction anticipated in a survey of refiners and traders.
Prices are still down about 12% this year on fears around a looming supply glut, while traders continue to monitor US trade tariffs as President Donald Trump said his Chinese counterpart is “extremely hard” to make a deal with.
Prices
WTI for July delivery slid 56 cents to settle at $62.85 a barrel in New York.
Brent for August settlement dropped 77 cents to settle at $64.86 a barrel.
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