Oil gains after monthly Saudi output unexpectedly drops
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[August 06, 2018]
By Amanda Cooper
LONDON (Reuters) - Oil rose on Monday after
Saudi crude production unexpectedly fell in July and U.S. drilling
appeared to slow, although the price is still almost 10 percent below
its 2018 high of more than $80 a barrel.
Markets also anticipated an announcement from Washington later on Monday
on renewed U.S. sanctions against major oil exporter Iran. So-called
"snapback" sanctions are due to be reinstated at 12:01 a.m. EDT (8.01
a.m. ET) on Tuesday, according to a U.S. Treasury official.
Saudi Arabia pumped around 10.29 million barrels per day (bpd) of crude
in July, two OPEC sources said on Friday, down about 200,000 bpd from a
month earlier.
That came despite a pledge by the Saudis and top producer Russia in June
to raise output from July, with Saudi Arabia promising a "measurable"
supply boost.
Brent crude oil futures were up 68 cents on the day at $73.89 a barrel
by 1116 GMT, while U.S. futures rose 90 cents to $69.39 barrel.
"Saudi Arabia knows that the U.S. really does want to see maximum impact
from sanctions towards Iran, which means that they want to prepare all
buyers of Iranian crude to say 'there is plenty of oil in the market and
don't be afraid to pull back on Iran (purchases)," said Bjarne
Schieldrop, head of commodities strategy at SEB.
This is not about bombarding the market with oil and pushing the price
into the $50s, it is about preparing the market and easing the
transition, he said. "There is no wish from Saudi Arabia to push prices
down to $50."
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A man pumps gas into his car at a gas station in Caracas, Venezuela
August 3, 2018. REUTERS/Marco Bello
Most Iranian crude exports go to China and India, but roughly 20 percent go to
Europe, where refiners have already cut their purchases. Saudi Arabia last week
cut its official selling prices for Asian customers to a four-month low. [OSP/O]
U.S. investment bank Jefferies said in a note that "the Saudi and Russian
production surges appear to be more limited" than initially expected, adding
that bullish market sentiment was also fueled by the imminent reinstatement of
U.S. sanctions against Iran.
Still, with Russia, the United States and Saudi Arabia now all producing 10
million to 11 million bpd of crude, just three countries now meet around a third
of global oil demand.
Meanwhile, U.S. energy companies last week cut oil rigs for a second time in the
past three weeks as the rate of growth has slowed over the past couple of
months.
Drillers cut two oil rigs in the week to Aug. 3, bringing the total count down
to 859, Baker Hughes energy services firm said on Friday.
(Additional reporting by Henning Gloystein in SINGAPORE; Editing by Mark Potter)
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