Oil prices slumped on Thursday, May 3, as swelling U.S. crude inventories and record weekly U.S. production clashed with OPEC supply cuts and the potential for new U.S. sanctions against Iran.
Brent crude oil futures LCOc1 were at $72.91 per barrel at 1113 GMT, 45 cents below their last close. U.S. West Texas Intermediate (WTI) crude futures were 10 cents lower at $67.83 per barrel, Reuters reports.
Prices have seesawed, edging lower during Asian trading hours, then higher at the start of the day in Europe, as the market grappled with conflicting fundamental signals.
On Wednesday, a report from the U.S. Energy Information Administration (EIA) showed a 6.2-million-barrel jump in U.S. crude inventories C-STK-T-EIA.
But bullish factors, including an increase in Saudi Arabia’s official oil selling price to Asia, also underpinned prices, according to Commerzbank analyst Carsten Fritsch.
“It may signal stronger-than-expected demand in Asia,” Fritsch said. “This, combined with constraints in (OPEC) production, could lead to higher prices.”
State-owned producer Saudi Aramco on Wednesday raised the June price for its Arab Light grade for Asian customers to a premium of $1.90 a barrel to the Oman/Dubai average, the highest since August 2014.
Additionally, the latest Reuters survey of OPEC production showed it pumped around 32 million barrels per day (bpd) in April, slightly below its target of 32.5 million bpd, due largely to plunging output in Venezuela.
Fritsch said the cuts, along with demand growth, were more than offsetting the increase in U.S. oil.
U.S. oil production rose to a record of 10.62 million bpd, putting it ahead of Saudi Arabia, the biggest OPEC producer. Only Russia pumps more, at around 11 million bpd.
U.S. drilling for new production is also increasing, encouraged by rising prices following OPEC’s production curbs.
The May 12 deadline for U.S. President Donald Trump to decide whether to continue waiving U.S. sanctions against Iran was also buffeting downward pressure on prices.
Iran re-emerged as a major oil exporter in January 2016 when international sanctions against Tehran were suspended in return for curbs on Iran’s nuclear programme.
