…Slips on Tuesday***
Oil ended about one per cent higher on Monday after a volatile trading session as traders focused on when Saudi Arabia would be able to restore full output, following the Sept. 14 attack on its facilities.
Brent futures gained 49 cents, or 0.8 per cent to settle at $64.77 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 55 cents, or one per cent to settle at $58.64.
“We’ve seen futures trade on both sides of unchanged today.
“The market is hesitant to drive too much higher at this point until it gets more facts.
“But I think the bullish news outweighs the bearish news and that is why we are up at the end of the day,’’ said Phil Flynn, an analyst at Price Futures Group in Chicago.
Brent futures started the session at a high of $65.50 on a report in the Wall Street Journal that it could take Saudi Arabia months longer than its Aramco Oil Company anticipates repairing damage from the attacks.
The global benchmark, however, fell to a low of $63.53 after Reuters reported Saudi Arabia could restore production by early next week.
A source briefed on the latest developments told Reuters that Saudi Arabia has restored more than 75 per cent of crude output lost after attacks that knocked down 5.7 million barrels per day, or more than half of the kingdom’s oil production and will return to full volumes by early next week.
“Although it’s not a foregone conclusion that response against Iran will occur, the uncertainty about what that may entail is keeping a level of risk premium in prices,’’ said Anthony Headrick, Energy Market Analyst at CHS Hedging LLC in Inver Grove Heights, Minnesota.
Also read: Iran Seizes Another Tanker for Allegedly Smuggling Fuel
Analysts projected U.S. inventories will likely remain below the five-year average in coming weeks as the country boosts exports to help fill the Saudi void.
Tension in the Middle East has escalated since the Saudi attack.
The Pentagon has ordered additional U.S. troops to be deployed in the Gulf region to strengthen Saudi Arabia’s air and missile defences.
Britain believes Iran was responsible for the attack and will work with the U.S. and European allies on a joint response, Prime Minister Boris Johnson said.
The U.S. and Saudi Arabia have also blamed Iran, which denies responsibility.
In a move that could cool tensions, Iran said the British-flagged tanker, Stena Impero, is “free to leave’’.
Iran seized the ship on July 19, two weeks after Britain detained an Iranian tanker off Gibraltar.
In the meantime, oil prices eased on Tuesday as weak manufacturing data from Europe and Japan focused market attention on the gloomy outlook for demand and away from uncertainty around supply disruptions in Saudi Arabia.
Brent crude futures LCOc1 fell 40 cents to 64.37 dollars a barrel by 0624 GMT, while U.S. West Texas Intermediate (WTI) futures CLc1 were at 58.31 dollars, down 33 cents.
“The demand side of the equation is back in focus,” said Michael McCarthy, senior market analyst at CMC Markets in Sydney, pointing to sluggish manufacturing numbers in leading economies in Europe as well as Japan.
“That’s why we’re seeing a little bit more (downward) pressure on Brent than West Texas at the moment.”
Still, oil prices remained at comparatively elevated levels for the year in the wake of the Sept. 14 attack on Saudi Arabia’s largest oil processing facility that halved output in the world’s top oil exporter.
Reuters reported that Saudi Arabia has restored more than 7 5 per cent of crude output lost after the attacks on its facilities and will return to full volumes by Sept. 30,
But the Wall Street Journal reported on Monday that repairs at the plants could take months longer than anticipated.
“Conflicting headlines lead to asymmetric conclusions, which have immobilized price action and investor risk taking,” Mike Tran, a commodity strategist at RBC Capital Markets said in a note.
An increase in U.S. oil exports to Asia to replace Saudi crude and a reduction in U.S. imports from Iraq meant that crude inventories in the United States could be lower than previously expected, he said.
European powers – Britain, Germany and France – backed the United States in blaming Iran for the Saudi oil attack, urging Tehran to agree to new talks with world powers on its nuclear and missile programs and regional security issues.
Meanwhile, a preliminary Reuters poll found on Monday that U.S. crude oil and distillate stockpiles were expected to have dropped last week.
Seven analysts polled by Reuters estimated, on average, that crude inventories fell 800,000 barrels in the week to Sept. 20.
The poll was conducted ahead of key inventory reports from the American Petroleum Institute, an industry group, to be released on Tuesday and from the Energy Information Administration on Wednesday.
