BD: Oil extends slide on economic concerns, Saudi supply hike
LONDON — Oil slipped below $114 a barrel on Tuesday, extending the previous session’s slide, as investors’ focus shifted from central bank stimulus to slowing global growth and on signs that Saudi Arabia is pumping at high rates to dampen prices.
A senior Gulf source said Saudi Arabia, the top crude exporter, was pumping about 10-million barrels a day — near the highest rate in decades — and a majority of producers from the Organisation of Petroleum Exporting Countries (Opec) wanted oil prices of about $100.
"Unless there is a major supply disruption in the Middle East, there is nothing to push it higher," VTB Capital analyst Andrey Kryuchenkov said. "Saudi will seek to drive it closer to $100 and everyone knows it."
Brent crude for November dropped 35c to $113.44 a barrel at 1.47pm GMT. On Monday, it tumbled $3.60 in the space of three minutes. US crude was trading 77c lower at $95.85. On Monday, it slipped about $4 in the same three-minute period.
The drop in Brent on Monday followed a seven-day rally fuelled by the Federal Reserve’s stimulus programme, and traders said it appeared to have stemmed from computer-based trading and rumours of a release of oil from the US Strategic Petroleum Reserve (SPR).
"The dramatic sell-off does not appear to have been driven by anything fundamental in the market. It looks as though it was triggered by computer trading system-type selling," said Tony Machacek, an oil futures broker at Jefferies Bache.
"We’ve seen a steady increase in prices, so maybe the market was a bit overbought and susceptible to a long-liquidation move to the downside."
The US Commodity Futures Trading Commission said it was looking into the drop in prices and checking with exchange operators CME Group and Intercontinental Exchange.
"There is some talk about a hedge fund liquidating positions," a Singapore-based trader at an investment bank said on Tuesday.
As well as oil, European shares, the euro and copper all slipped on Tuesday on concern about slowing global growth and doubts about Spain’s desire for an international aid package.
"To a certain extent there are still a lot of questions about the economy," said Jim Ritterbusch, president of energy consultants Ritterbusch & Associates in Galena, Illinois.
"All eyes are on China now to see if the government there will increase their stimulus spending programme."
Oil remained supported by anti-US protests over a film demonstrators consider blasphemous to Islam and escalating tension between the West and Iran over its nuclear work. The tensions heighten the risk of supply disruption in the region.
The White House said on Monday it was still considering a release from the SPR but declined to provide more details and made no further announcement after the big dip in crude prices.
The latest weekly reports on US commercial inventories are expected to show crude stocks rose due to restart of Gulf Coast refinery activity after the passage of Hurricane Isaac.
At 4.30pm EDT (8.30pm GMT) on Tuesday, the American Petroleum Institute will release the first of this week’s inventory reports. Crude inventories were forecast to have risen by 200,000 barrels.
