West Texas Intermediate dropped from its biggest gain since September amid speculations that a decline in Saudi Arabian supply to the market does not indicate cuts in production. Brent widened premiums to WTI.
Crude futures capped the fourth weekly decline. Crude supplies from Saudi Arabia slipped last month despite an increase in production, a person familiar with the kingdom’s policy on oil reported. Both WTI and Brent have declined more than 20% from the June high amid concerns on global supply outpacing demand.
Bloomberg quoted Tyche Capital Advisors fund manager Tariq Zahir as having said, “The Saudis are not cutting production. They can tolerate low prices. We have plenty of supply and the trend for oil is to go lower.”
Saudi’s oil supply to markets dropped 328,000 barrels per day to 9.36 million in September from 9.69 million barrels in August.
This figure does not include the amount of oil that is in storage. The production was 9.7 million barrels per day last month, up from the 9.6 million barrels of August.
The decline comes as the country is keeping more to meet its rising domestic demand, as reported by BNP Paribas SA. Saudi crude refinery demand rose the highest in around 12 years in August.
SEB AB chief commodity analyst, Bjarne Schieldrop said, “The Saudis increased production, so there is no signal that they’ve changed their behavior with an eye on pushing prices back up.
According to Reuters, US crude oil futures slid as December delivery settled at $81.01 per barrel down by $1.08 after dropping $1.74 since Friday last week.
Zahir added, “Saudi Arabia doesn’t mind oil going a little bit lower. With all the production increase in the United States, we are their biggest competitor right now. But they have enough cash to deal with prices going lower.”
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