Asia's oil dips amid Saudi Arabia output boost reports

Oil prices eased slightly in Asia on Thursday amid emerging reports that OPEC kingpin Saudi Arabia would further raise output in August.

MENA

2 min read

The New Arab & agencies

18 August, 2016

An OPEC meeting is expected to be held in Algeria in September [Getty]

Asia's oil prices witnessed slight relief on Thursday as reports suggested OPEC kingpin Saudi Arabia would further raise output in August.

Analysts said gains were being eroded by media reports that Saudi Arabia, Organisation of Petroleum Exporting Countries' (OPEC) top producer, is ramping up production to fresh record levels in August.

Prices hit five-week highs this week, easing the stubborn supply glut dogging the market since late last year as hopes of a Russian-Saudi pact to freeze output continued to rise.

The market was boosted further on Wednesday after the weekly US inventories report showed significant declines in commercial crude stockpiles, indicating strong demand in the world's top oil consumer.

In July, Saudi output was at a record 10.67 million barrels per day while US crude stockpiles fell by 2.5 million barrels in the week to August 12, and gasoline stocks declined 2.7 million barrels, official data showed.

"The upside is capped by Saudi’s signals of pumping more oil in August, which could give the Kingdom more leverage during talks in Algeria next month," said EY Services oil and gas head Sanjeev Gupta.

"The oil market will continue to seesaw amid scepticism over the coordinated efforts to stabilise output," he told AFP.

Meanwhile, OPEC members and their non-OPEC rivals are to meet informally in Algeria next month, and both Saudi and Russia have indicated they could discuss measures to stabilise prices.

Stephen Innes, senior trader at OANDA, said prices are on the slide "as optimism faded for a freeze production agreement... after Iran communicated little interest in the arrangement".

"What needs closer monitoring are the industry-sourced reports that Saudi Arabia could boost crude oil output in August to record levels," Innes said.

A Saudi-led attempt to freeze output levels earlier this year failed after rival oil producer Iran refused to be part of the deal, saying it needed to raise production dented by years of Western economic sanctions, which were lifted in January.

IG Markets' Melbourne-based analyst Angus Nicholson said there were "concerns that Saudi Arabia may continue producing oil at their summer output levels rather than following their usual seasonal slowing of production".