(Bloomberg) -- Crude fell after Saudi Arabia and Russia signaled an impending production increase by OPEC and allied nations will be larger than some estimated.
Futures slid 1.1 percent in London on Monday. Oil chiefs from the world’s top two crude exporters indicated that last week’s 24-nation accord will add 1 million barrels to daily supplies, more than the 700,000-barrel figure cited by several cartel members. Meanwhile, U.S. crude futures for prompt delivery fell less than other contracts amid concern supplies may tighten at a key American storage complex in Oklahoma.
“It’s really just the OPEC volumes coming to market pressuring” prices, said Michael Loewen, a commodities strategist at Scotiabank in Toronto.
Following OPEC’s deal with allies to raise supplies, Saudi Arabia’s state oil giant pledged to meet all customer demands for its crude, according to Saudi Aramco Chief Executive Officer Amin Nasser. The world’s biggest exporter, officially known as Saudi Arabian Oil Co., is pumping 10 million barrels a day and has the capacity to produce 2 million more, Nasser told reporters.
“When you look at Brent, the new supplies we’re going to see from OPEC will mainly hit that market,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto.
Brent futures for August settlement slipped 82 cents to settle at $74.73 a barrel on the ICE Futures Europe exchange.
See Also: Traders Are Paying a Record Premium for Oil at Key U.S. Hub
West Texas Intermediate crude for August delivery fell 50 cents to end the session at $68.08 on the New York Mercantile Exchange. Total volume traded was about 31 percent above the 100-day average.
Brent’s premium to the U.S. benchmark for the same month shrank to $6.65 a barrel from more than $10 last week.
A key piece of equipment at Syncrude Canada’s oil-sands complex in Alberta halted operations last week after a transformer blast shut the entire 350,000 barrel-a-day facility. The outage may trigger shortages across North America through the end of July and shrink stockpiles at the Cushing, Oklahoma, storage hub, Goldman Sachs Group Inc. said.
Supplies at Cushing probably fell by 1.3 million barrels last week, according to a forecast compiled by Bloomberg. Crude stockpiles at the hub are already at the lowest level since March.
As a result of the Syncrude pinch, the premium at which front-month WTI futures traded to the September contract widened to as much as $1.76 on Monday, the biggest premium for the front-month spread since 2014.
The S&P 500 Energy Index fell as much as 2.7 percent, led by Marathon Oil Corp. and HollyFrontier Corp., which both declined more than 5 percent.
- Gasoline futures fell 0.9 percent to settle at $2.0515 a gallon
- U.S. crude stockpiles fell by an estimated 2.5 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg
- While OPEC’s decision to return to full compliance from unintentional over-compliance is likely to keep prices in their recent range over the coming months, it sets the stage for a bullish backdrop as countries such as Venezuela and Iran remain “severely challenged” to raise output, according to RBC Capital Markets
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