Oil prices fell more than 2 per cent on Monday, retreating from last week’s two-month highs, on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising US oil rig count.
China’s July diesel and gasoline exports soared 181.8 per cent and 145.2 per cent respectively from the same month last year, putting pressure on refined product margins.
US drillers added 10 oil rigs in the week to August 19th, the eighth straight week of rig additions, as crude rebounded towards the $50 a barrel mark that makes drilling viable.
Iraq’s plans this week to increase exports of Kirkuk crude by 150,000 bpd from northern fields weighed on prices, traders said.
Ceasefire
Also hitting sentiment was an announcement by a Nigerian militant group that it was ready for a ceasefire and dialogue with the government. The group had in the past claimed a wave of attacks on oil facilities in the Niger Delta.
Data from market intelligence firm Genscape, showing a drawdown of over 187,000 barrels last week at the Cushing, Oklahoma delivery hub for US crude futures, did little to shore up sentiment, traders who saw the numbers said.
Brent crude was down $1.34, or 2.6 per cent, at $49.54 a barrel in afternoon trading. Brent hit a two-month high of $51.22 on Friday.
US West Texas Intermediate (WTI) crude’s most active contract, October, fell $1.28, or 2.5 per cent, to $49.60 a barrel. WTI’s front-month contract, September, which expires at Monday’s settlement, hit a six-week high of $48.75 on Friday.
Rally
Oil rallied with few stops over the past two weeks, going from a bear to bull market as it reversed a loss of more than 20 per cent in early August on speculation Saudi Arabia and the rest of the Organization of the Petroleum Exporting Countries will agree to a production freeze with Russia and other non-OPEC members.
“We continue to view a meaningful OPEC production agreement as highly unlikely,” Wall Street investment bank Morgan Stanley said in a note.
“It is unlikely Riyadh will take any freeze negotiation seriously as officials believe the market share policy is slowly but surely working,” Morgan Stanley said, referring to Saudi Arabia’s policy of defending market share above price support.
It, however, added that oil could be volatile between now and late September before OPEC and other producers meet in Algeria.
– (Reuters)
