Oil prices dropped on Tuesday morning as the market continues to buy Saudi Arabia’s rhetoric that adds to outlooks for weaker global demand growth and rising U.S. production to drive the price of oil down.
In contrast to last week’s reports that Saudi Arabia would be willing to extend the production cuts with which OPEC is trying to ‘fix’ the global oversupply and lower-for-longer oil prices, The Wall Street Journal reported on Tuesday that Saudi Arabia’s Energy Minister had told reporters in Riyadh on Monday that “it is premature to talk about extending the cut”.
As of 9:32AM (EDT) on Tuesday, WTI Crude was down 0.49 percent at $52.39, while Brent Crude was trading down 0.56 percent at $55.05.
The umpteenth Saudi comment is not the only force weighing on the price of oil today.
The EIA’s Drilling Productivity Report from Monday showed that U.S. oil production is expected to increase by 124,000 bpd in May over April. This would be the largest monthly increase since February 2015, The Journal reckons.
The U.S. rig count hit a two-year high last week—at 683 active oil rigs, the number was the highest since April 2015.
On the demand side, last week the International Energy Agency (IEA) downgraded global oil demand growth for this year, dropping its estimate to 1.3 million bpd. The agency puts the blame on weaker-than-expected demand in the first quarter, which was the result of disappointing figures in India, Russia, the U.S., Korea and the Middle East.
Related: Could An OPEC Extension Normalize Inventories?
According to Olivier Jakob from Switzerland-based consultancy Petromatrix, as quoted by The Journal: “You have supportive data from Saudi Arabia showing a large drop in exports but on the other hand you have an increase in U.S. production…The prices are going lower. There is some profit-taking on short positions.”
By Tsvetana Paraskova for Oilprice.com
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