Crude tumbles 5% as Saudis pledge to produce more

24 October, 2018, 19:14 | Author: Manuel Hopkins
  • US issues warning to Russia about helping Iran escape upcoming oil sanctions

While U.S. sanctions on Iran which start on November 4 are expected to tighten supplies, other producers, notably top exporter Saudi Arabia, are already pumping more oil and willing to increase further if needed.

"The market's knowledge of this disability has led to an increase in oil prices, with the West Texas Intermediate (WTI) and Brent North Sea average rising from $67 and $77 in May to $74 and $84 per barrel respectively in October", he said.

Benchmark Brent crude oil futures rose 45 cents on the day to US$80.23 a barrel by 0900 GMT, while U.S. crude futures rose 31 cents to US$69.43 a barrel.

Saudi Arabia is ready to raise its output to 11 million barrels a day "in the near future" and has the ability to lift production as high as 12 million barrels a day if the market requires it, Al-Falih said. "We work to stabilize global markets and to facilitate global economic growth", he added. In addition to its crude investments, Saudi Arabia intends to partner in liquefied natural gas projects overseas and start trading LNG in the future.

Oil prices fell almost 3 percent to more than one-month lows on Tuesday after Saudi Arabia said it could supply more crude quickly if needed, easing concerns ahead of us sanctions on Iran and as USA equity markets sold off. The reassurances seem to have worked, with oil markets more focused on American crude stockpiles than the potential fraying of the U.S. -Saudi relationship. Brent crude futures have now followed WTI following yesterday's plunge which sees the Brent curve now in contango of -$0.03.

United States sanctions on Iran's oil sector start on Nov 4 and analysts believe anything up to 1.5 million bpd in supply could be at risk.

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"But if you have other countries to decline in addition to the full application of Iran sanctions, then we will be pulling all spare capacities", Falih said.

The killing of journalist and US resident Jamal Khashoggi by Saudi agents has stirred calls for USA sanctions on the kingdom. Falih said on Monday there was no intention of doing that.

The Organization of the Petroleum Exporting Countries (OPEC) agreed in June to boost supply to make up for the expected disruption to Iranian exports.

Data from API showed crude inventories rose 9.9 million barrels last week to 418.4 million, compared with analysts' expectations for an increase of 3.7 million barrels.

Since that agreement, oil prices have more than doubled and were now hovering at just under $80 a barrel.

"There are several reasons for the slide in crude oil, chief among them is it's a risk-off day across all financial markets", said Bob Yawger, director of the futures division at Mizuho Securities USA.

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