Crude dips on report of Saudi oilfield expansion
Oil prices fell Monday on a report OPEC kingpin Saudi Arabia could maintain its total production capacity with the expansion of an oilfield, fuelling fears over the global supply glut.
At about 1630 GMT, US benchmark West Texas Intermediate (WTI) for delivery in June shed 82 cents to $42.91 a barrel.
Brent North Sea crude for June sagged 26 cents to $44.85 per barrel compared with Friday's close.
"Prices (are) meandering... as news disperses of a possible Saudi oilfield expansion which could bolster supply, ultimately spelling more problems for a market already excessively oversupplied," said analyst Lukman Otunuga at trading firm FXTM.
The losses come after a week of strong gains in the commodity that were on the back of hopes for the outlook for China's economy and speculation about the resumption of talks on limiting output.
Saudi Arabian Oil Co. will complete an expansion of its Shaybah oilfield by the end of May, allowing the world's largest exporter to maintain total capacity at 12 million barrels a day, Bloomberg News reported.
The move will see Shaybah's capacity rise from 750,000 barrels to 1.0 million barrels a day, the report said.
The report caused "market jitters", said Bernard Aw, an analyst with IG Markets in Singapore.
"If the Saudis ramp production up by a substantial amount, the $40 mark should be easily broken. That creates a problem that we're not even going to see the oil market rebalance, not even by the first half of next year," he told AFP.
Prices tumbled initially last Monday after the collapse of a meeting of major producers aimed at freezing output.
However, falling US production, a strike in key producer Kuwait and signs of a pick-up in key market China helped propel an 8.3-percent surge over the week for WTI, while Brent rose 4.7 percent.
The oil market had also won support from the Baker Hughes weekly US rig count, which showed oil producers curtailed use of eight drilling rigs in the week ending April 22.
Aw added that prices are still being supported by hopes of an agreement to freeze output at OPEC's next twice-yearly meeting on June 2.
"There's still a little bit of optimism that producers could come to some sort of an agreement in June... The market participants are always quite hopeful of such talks," he noted.
The global oil market had nosedived from above $100 in mid-2014 to 13-year lows of around $27 in February, plagued by the stubborn supply glut.
Prices have since rebounded on hopes of an output freeze deal, but this failed to materialise at crucial producer talks in Doha earlier this month.
© 2016 AFP