LONDON: Oil retreated from the highest close in five months amid signs a global glut will be prolonged as Middle East producers boost supplies.
Futures fell more than 1.5 percent in New York and London. Saudi Arabian Oil Co.
Oil has rebounded after falling to the lowest in more than 12 years amid signs a global surplus will ease as U.S. production declines. The International Energy Agency reiterated on Thursday it expects output outside of the Organization of Petroleum Exporting Countries to decline by about 700,000 barrels a day this year, which would be the biggest drop in a quarter century.
The news of Saudi Arabia expanding its field capacity “is marginally bearish,” according to Jens Pedersen, an analyst at Danske Bank A/S. “The oil market is coming off a strong week last week,” following the Doha meeting where OPEC and other producers failed to agree to a deal to freeze production, he said.
West Texas Intermediate for June delivery lost as much as 1.8 percent to $42.95 a barrel on the New York Mercantile Exchange and was at $43.24 at 9:41 a.m. London time. The contract gained 55 cents to $43.73 on Friday, the highest close since Nov. 10, capping a weekly gain of 8.4 percent. Total volume traded was about 6.8 percent below the 100-day average.
Brent for June settlement slid as much as 70 cents, or 1.6 percent, to $44.41 a barrel on the London-based ICE Futures Europe exchange. Prices advanced 4.7 percent last week for a third weekly advance. The global benchmark crude was at a premium of $1.44 to WTI.
Production capacity of the Shaybah oil field will rise to 1 million barrels a day from 750,000 barrels, said the people, who asked not to be identified because the information isn’t public. The field, in the Empty Quarter desert near the border with the United Arab Emirates, produces extra light grade crude with API gravity of 42 degrees, they said.
Rigs that drill for oil in the U.S. fell for a fifth straight week to 343, according to Baker Hughes Inc. data. That helped prices on April 22, according to Exane BNP Paribas. “However, the largest inventory overhang and the increased hedging activity that is expected to occur above $45 are reasons for us to remain cautious on prices,” it said. Producers typically hedge their oil output more when prices recover.