GY: Oil falls on Saudi pressure to keep prices down
Brent crude oil futures slid to a six-week low on Wednesday, as the market digested comments from the world’s largest oil exporter Saudi Arabia that it would take action to keep prices in check, raising expectations of increased supply.
Oil fell further after weekly data from the Energy Information Administration (EIA) showed crude stocks in top consumer the United States climbing 8.5 million barrels – far more than expected.
On Tuesday an OPEC Gulf source said Saudi Arabia was pumping around 10 million barrels per day (bpd) and working to keep oil prices down.
“People are thinking that maybe the Saudis are going to produce more, and some funds are taking the opportunity to liquidate positions,” said Christopher Bellew at Jefferies Bache.
Brent November crude fell $3.05 to $108.98 a barrel by 10:54 a.m. EDT (1454 GMT). It touched its lowest since August 7 and is down 5.6 percent this week.
U.S. October crude was down $2.84 at $92.45 a barrel. The contract expires on Thursday.
Oil markets are sufficiently supplied, OPEC’s secretary general Abdullah al-Badri said on Wednesday, maintaining the Organization of the Petroleum Exporting Countries’ view that supply is enough despite high prices that are worrying consumer countries.
Market participants said earlier that worries about the perilous state of Spain’s finances had snuffed out gains made by oil prices after Japan’s central bank became the latest to further open its monetary taps.
Japan followed the U.S. Federal Reserve and said it would boost asset purchases in the face of a slowing global economy, spurring hopes other central banks would follow suit.
Some analysts, however, think that quantitative easing will have little positive impact on oil prices.
TECHNICALS
Market players pointed to a weaker technical outlook as also weighing on prices with the sharp falls prompting funds that held long positions to exit, leading to further weakness.
“(It is) a classic liquidation move, all technicals for now,” said Mike Guido, head of hedge fund sales at Macquarie in New York.
“With Brent below its 200-day moving average and with the expiring WTI (falling below) at the $94 support line, more losses cannot be ruled out,”
Emphasizing political risks that are underpinning oil prices, France said it would temporarily close its embassies and schools in 20 countries on Friday after a French magazine published cartoons of the Prophet Mohammad.
After Japan, investor focus turns to China, the world’s second-largest oil consumer, with a preliminary reading of its manufacturing activity for September set for publication on Thursday, along with similar data from the United States and Europe.
