Oil fell in New York, erasing earlier gains, after Saudi Arabia’s production last month was said to have risen above the cap it agreed on with fellow OPEC members.
Futures slid 1 percent after advancing 1.2 percent earlier. Saudi Arabia told OPEC it raised output by 190,000 barrels a day to 10.07 million in June, a person familiar with the matter said, higher than 10.058 million limit set last year. That’s the opposite of the “shock and awe” strategy of deeper cuts Goldman Sachs Group Inc. said producers should be adopting.
Oil is in a bear market amid concern that rising global supply will offset curbs by the Organization of Petroleum Exporting Countries and its partners including Russia. U.S. crude inventories remain more than 100 million barrels above the five-year average. The nation’s shale output can expand further with prices in the mid-$40s, according to JPMorgan Chase & Co. Increases from Libya and Nigeria are also diluting the impact of supply curbs.
“For sure, it does not help the current bearish sentiment,” Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen, said of Saudi Arabia’s reported production level. “Market activity is thin in summer so any news, especially the bearish ones, receives attention.”
West Texas Intermediate for August delivery was at $43.93 a barrel on the New York Mercantile Exchange, down 46 cents, at 12:36 p.m. London time. Total volume traded was about 44 percent above the 100-day average. The contract climbed 17 cents to $44.40 on Monday, advancing after a weekly loss.
Brent for September settlement was down 48 cents at $46.40 a barrel on the London-based ICE Futures Europe exchange, after rising 17 cents to $46.88 on Monday. The global benchmark crude traded at a premium of $2.26 to September WTI.
Oil may slip below $40 a barrel unless there are sustained inventory declines and a drop in the rig count, while evidence of further OPEC actions could help prices rally, Damien Courvalin, an analyst at Goldman, said in a note dated July 10.
U.S. crude stockpiles probably fell by 2.85 million barrels last week, a Bloomberg survey showed before an Energy Information Administration report Wednesday. Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, probably slid by 1.4 million barrels last week, according to the forecast compiled by Bloomberg. The OPEC-led agreement to cut output is working, Russian Energy Minister Alexander Novak reiterated on state-run Rossiya 24 television. A type of U.S. crude pumped in the Gulf of Mexico is proving to be more attractive in India, the fastest-growing oil market, compared with Middle East staples on offer.