Oil extended declines as Saudi Arabia was said to be ahead of schedule in restoring its output capacity.
Futures lost as much as 1.5% in New York after dropping 2.3% on Tuesday. Saudi Aramco’s production capacity now exceeds 11 million barrels a day, beating a self-imposed deadline by about a week, according to people with knowledge of the situation. The Abqaiq processing plant has 4.92 million barrels a day of capacity available and Khurais 1.3 million, they said, which are at or above the levels before the Sept. 14 attack.
Aerial strikes on the two plants disabled 5% of global crude supply, driving Brent crude higher by the most on record. Prices have since pulled back as Aramco — formally known as Saudi Arabian Oil Co. — has promised it will return all lost production by the end of this month, despite skepticism from consultants including Rystad Energy AS and FGE. A gloomy global economic outlook and weakening oil demand growth has also pushed oil lower.
“With the oil market reassured that no material disruption to Saudi supply to its customers has occurred following the drone attacks on the Abqaiq processing facility, the oil price pursues its retreat from last week’s highs,” said BNP Paribas head of commodities strategy Harry Tchilinguirian. “The oil market dodged a bullet, but there is no guarantee that another drone attack will not be repeated in the future.”
West Texas Intermediate for November delivery dropped 84 cents, or 1.5%, to $56.45 a barrel on the New York Mercantile Exchange as of 10:06 a.m. London time. Brent for the same month slipped $1.09, or 1.7%, to $62.01 a barrel on the ICE Futures Europe Exchange, and traded at a $5.53 premium to WTI.
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Saudi Arabia is showing it’s starting to resolve the worst output disruption in its history. There had been speculation that it would take months to repair the extensive damage caused by the attacks. Aramco had said on Sept. 17 that it will restore its production capacity to 11 million barrels a day by the end of September, while the full level of 12 million will only be available in November.
There was other bearish news for oil. The American Petroleum Institute reported a 1.38 million-barrel increase in U.S. crude stockpiles last week, according to people familiar with the data. That was in contrast to the 600,000 barrel-draw forecast in a Bloomberg survey before government data Wednesday.
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