Oil traded near the lowest closing level in three weeks as diplomatic efforts to resolve a clash between Qatar and Saudi Arabia eased tensions in the world’s biggest energy-producing region.
Futures were little changed in New York after sliding 2 percent in the previous two sessions. Kuwait’s ruler will travel to Saudi Arabia on Tuesday to mediate an end to the feud between Qatar and a Saudi-led alliance, which accuses the Gulf state of terrorism links. Prices initially surged on Monday before settling lower as the spat was seen having a limited impact on world crude markets, which remain oversupplied.
Oil is trading below $50 a barrel amid speculation that rising U.S. supply will counter production curbs by the Organization of Petroleum Exporting Countries and its partners, including non-OPEC member Russia. American stockpiles have edged lower, but output has extended gains to the highest since August 2015.
“The rift provided a brief pillar of price support but these gains eventually fizzled,” Stephen Brennock, an analyst at PVM Oil Associates Ltd., said in a report. “Pervasive doubts surrounding OPEC’s attempt to normalize global stocks retained center stage.”
West Texas Intermediate for July delivery was at $47.33 a barrel on the New York Mercantile Exchange, down 7 cents, at 9:54 a.m. in London. Total volume traded was about 85 percent above the 100-day average. The contract lost 26 cents to $47.40 on Monday, the lowest close since May 10, after erasing an intraday gain of as much as 1.6 percent.
Brent for August settlement was down 7 cents, or 0.1 percent, to $49.40 a barrel on the London-based ICE Futures Europe exchange. Prices slid 48 cents, or 1 percent, to $49.47 on Monday. The global benchmark crude traded at a premium of $1.92 to WTI, near the narrowest level since February.
U.S. inventories probably dropped by 3.5 million barrels last week, a ninth straight decline, according to a Bloomberg survey before the release of data from the Energy Information Administration.
Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, decreased by 750,000 barrels last week, according to a forecast compiled by Bloomberg. American production has expanded to 9.34 million barrels a day, according to the Energy Information Administration, which will release its weekly report Wednesday.
- Qatar can still access shipping routes to deliver oil and gas to buyers after Saudi Arabia and other neighboring states barred the emirate from exporting through their territorial waters.
- Indonesia has applied to become part of OPEC once again, according to Hadi Djuraid, a special adviser to Energy and Mineral Resources Minister Ignasius Jonan.
- Oil bulls fatigued by the failure of prices to sustain rallies would welcome some words of encouragement from OPEC, according to Citigroup Inc.