“With
the recent price drop, consensus was emerging for a production cutback,
certainly not an increase or talk of one,”
said John Kilduff, a partner
at Again Capital LLC in New York. – File photo
NEW YORK: Oil tumbled 3 per cent on Monday, with US crude at
its lowest for the year as fears that the euro zone debt crisis will
engulf more countries and threaten petroleum demand reversed a rally
sparked by Europe’s plan to rescue Spanish banks.
Also pressuring prices, top exporter Saudi Arabia said OPEC may need
to raise oil output targets at its Thursday meeting in Vienna.
With Brent crude down sharply from a 2012 peak above $128 a barrel in
March, the Saudi position puts OPEC’s top producer at odds with other
cartel members that favor reduced production to stem a supply glut.
Crude futures reversed after rallying more than $2 on the news that
euro zone finance ministers on Saturday agreed to lend Spain up to 100
billion euros ($125 billion) to tackle the problems of debt-stricken
banks.
But oil faded, the euro erased gains against the dollar and US stocks
fell as investors fretted over the impact of the deal on public debt
and whether Greece’s elections on Sunday will deepen the region’s
crisis.
“While avoiding bank failures in Spain is a good thing, investors
realize that the Italians will probably want help next, so it’s not a
surprise for crude to pull back,” said Phil Flynn, an analyst at Price
Futures Group in Chicago.
Brent July crude fell $1.47 to settle at $98 a barrel, after reaching
$102.21. Brent extended losses to $96.48 in post-settlement trading,
approaching the $95.63 low for the year struck on June 4.
US July crude slumped $1.40 to settle at $82.70 a barrel, off its
$86.64 peak. A post-settlement drop to $81.11 eclipsed the $81.21 low
for the year struck on June 4.
Brent and US crude fell for a third straight day.
Brent trading volume outpaced US crude turnover and both had dealings above their respective 30-day averages.
US RBOB gasoline and heating oil futures settled lower, but losses
were limited by news that a recently commissioned
325,000-barrels-per-day (bpd) crude unit at Motiva Enterprises’ Port
Arthur, Texas refinery was expected to be shut for up to five months.
Crude prices received support from data showing China’s crude imports
rose to a record 25.48 million tonnes, or about 6 million bpd, in May,
up 18.2 per cent from a year earlier.
But implied oil demand edged up only 0.4 per cent from a year before and only marginally from April.
Other data showed China’s inflation, industrial output and retail
sales all came in below expectations in May, sounding another note of
caution about the global economy.
SAUDI: HIGHER OUTPUT MAY BE NEEDED
With a contentious OPEC meeting looming, Ali al-Naimi, Saudi Arabia’s
oil minister, said OPEC may need to raise its oil output target for the
second half of the year.
“Our analysis suggests that we will need a higher ceiling than
currently exists,” he said in an interview in the Gulf Oil Review.
Saudi Arabia has lifted crude oil production sharply to 10 million
bpd, a 30-year high, in an effort to help bring prices down and help
nurture a faltering global economy.
Iraq’s oil minister, also serving as OPEC’s president, signalled that
the producer group could act to reduce a global supply glut but was
unlikely to set country production quotas at the meeting.
Kuwait’s oil minister said he believed a discussion about potential output cuts was most likely inevitable.
“With the recent price drop, consensus was emerging for a production
cutback, certainly not an increase or talk of one,” said John Kilduff, a
partner at Again Capital LLC in New York.
IRAN’S NUCLEAR DISPUTE
Iran approaches the OPEC meeting facing tightening US-led sanctions
and a European Union embargo on Iranian oil set for July as the dispute
over Tehran’s nuclear program continues.
The United States will exempt India, South Korea and five other
economies from financial sanctions in return for significantly cutting
purchases of Iranian oil. Iran’s top oil buyer China and Singapore did
not receive waivers.
Iran’s deputy negotiator said world powers were unprepared for the
next round of talks over the nuclear issue and had failed to honor
agreements reached in previous negotiations, Iranian media said on
Sunday.
Iran and the six powers — the United States, France, Russia, China,
Germany and Britain — will meet for a third time this year in Moscow on
June 18-19 to discuss the nuclear issue after making little progress at
their most recent meeting.
