Singapore | Oil prices eased slightly in Asia Thursday amid reports OPEC kingpin Saudi Arabia would further raise output in August.
Prices hit five-week highs this week, supported by hopes that a Russian-Saudi cooperation may reach a pact to freeze output, easing the stubborn supply glut dogging the market since late last year.
OPEC members and their non-OPEC rivals are to meet informally in Algeria next month, and both Saudi and Russia have indicated they could discuss measures to stabilise prices.
The market was boosted further yesterday after the weekly US inventories report showed significant declines in commercial crude stockpiles, indicating strong demand in the world’s top oil consumer.
US crude stockpiles fell by 2.5 million barrels in the week to August 12, and gasoline stocks declined 2.7 million barrels, official data showed.
Analysts however, said gains were being eroded by media reports that Saudi Arabia, OPEC’s top producer, is ramping up production to fresh record levels in August.
Saudi output was at a record 10.67 million barrels per day in July.
“The upside is capped by Saudi’s signals of pumping more oil in August, which could give the Kingdom more leverage during talks in Algeria next month,” said EY Services oil and gas head Sanjeev Gupta.
“The oil market will continue to seesaw amid scepticism over the coordinated efforts to stabilise output,” he told AFP by email.
At about 1030 IST, US benchmark West Texas Intermediate for September delivery was down two cents to USD 46.77 while North Sea Brent was down 16 cents to USD 49.69. Both contracts closed higher yesterday.
Stephen Innes, senior trader at OANDA, said prices are on the slide “as optimism faded for a freeze production agreement after Iran communicated little interest in the arrangement”.
A Saudi-led attempt to freeze output at January 2016 levels failed in April after rival oil producer Iran refused to be part of the deal, saying it needed to raise production dented by years of Western economic sanctions, which were lifted in January.
“What needs closer monitoring are the industry-sourced reports that Saudi Arabia could boost crude oil output in August to record levels,” Innes said.
IG Markets’ Melbourne-based analyst Angus Nicholson said there were “concerns that Saudi Arabia may continue producing oil at their summer output levels rather than following their usual seasonal slowing of production”.