Crude oil futures price declines extended into mid-morning trading Tuesday after US equity markets opened sharply lower. NYMEX December WTI was down $1.91 at $67.45/b and ICE December Brent was $2.02 lower at $77.81/b. Oil markets had been trading lower ahead of the US open on the back of renewed pledges from Saudi Arabia to produce more oil once US sanctions on Iran snap back next month. “The market seemed to come under pressure overnight on reassurances that Saudi Arabia will keep the market well-supplied,” Tradition Energy analyst Gene McGillian said. “Early morning pressure correlated with economics concerns as equity markets are getting hit today,” he added.
NYMEX November ULSD was 4.31 cents lower at $2.2750/gal, and NYMEX November RBOB was down 4.34 cents at $1.8633/gal. Just ahead of the US stock market open, WTI was testing intraday lows and Brent was down almost $2/b. Oil products were also far below opening levels, with ULSD and RBOB both trading more than 4 cents lower ahead of the opening bell. On Monday, Saudi oil minister Khalid al-Falih said Saudi Arabia would hike output to as high as 11 million b/d, according to news reports, and attempted to stem worries that the country would impose an oil embargo.
“As we see signs [Saudi Arabia] is able to boost production, the correction is picking up again. I wouldn’t hesitate to say that as we approach the November 4 deadline for Iran sanctions the market is going to continue to free fall unless we see a significant uptick in concerns of deteriorating demand or economic conditions,” McGillian said. Saudi Arabia supplied 10.502 million b/d during August, the latest data from the Joint Organizations Data Initiative showed. But August production was only 10.412 million b/d, necessitating a roughly 90,000 b/d inventory draw. The stock draw was the third-straight monthly drawdown, with Saudi inventories ending the month at 226.59 million barrels, down 12.4% from May 2017, according to the JODI data.