By Ben Sharples and Grant Smith on 6/6/2017
HONG KONG (Bloomberg) -- Oil traded near the lowest
closing level in three weeks as diplomatic efforts to resolve a clash between Qatar and Saudi Arabia eased tensions in the world’s biggest energy-producing region.
Futures were little changed in New York after sliding 2% in the previous two sessions. Kuwait’s ruler will travel to Saudi Arabia on Tuesday to mediate an end to the feud between Qatar and a Saudi-led alliance, which accuses the Gulf state of terrorism links. Prices initially surged on Monday before settling lower as the spat was seen having a limited impact on world crude markets, which remain oversupplied.
Oil is trading below $50/bbl amid speculation that rising U.S. supply will counter production curbs by OPEC and its partners, including non-OPEC member Russia. American stockpiles have edged lower, but output has extended gains to the highest since August 2015.
“The rift provided a brief pillar of price support but these gains eventually fizzled,” Stephen Brennock, an analyst at PVM Oil Associates, said in a report. “Pervasive doubts surrounding OPEC’s attempt to normalize global stocks retained center stage.”
WTI for July delivery was at $47.33/bbl on the NYME, down $0.07, in London. Total volume traded was about 85% above the 100-day average. The contract lost $0.026 to $47.40 on Monday, the lowest close since May 10, after erasing an intraday gain of as much as 1.6%.
Brent for August settlement was down $0.07, to $49.40/bbl on the London futures exchange. Prices slid $0.48, to $49.47 on Monday. Brent traded at a premium of $1.92 to WTI, near the narrowest level since February.
U.S. inventories probably dropped by 3.5 MMbbl last week, a ninth straight decline, according to a Bloomberg survey before the release of data from the EIA.
Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, decreased by 750,000 bbl last week, according to a forecast compiled by Bloomberg. American production has expanded to 9.34 MMbpd, according to the EIA, which will release its weekly report Wednesday.
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Qatar can still access shipping routes to deliver oil and gas to buyers after Saudi Arabia and other neighboring states barred the emirate from exporting through their territorial waters. Indonesia has applied to become part of OPEC once again, according to Hadi Djuraid, a special adviser to Energy and Mineral Resources Minister Ignasius Jonan. Oil bulls fatigued by the failure of prices to sustain rallies would welcome some words of encouragement from OPEC, according to Citigroup.