Crude oil eased on Tuesday as details emerged of a higher-than-expected possible boost to supplies from the Organisation of the Petroleum Exporting Countries.
Sheikh Ahmad Fahd al-Sabah, Opec president and Kuwaiti oil minister, said several Opec ministers proposed a 500,000 barrels per day immediate quota rise. If approved at the cartel’s meeting in Vienna starting on Wednesday, output would rise to 28m b/d. However, Opec is already exceeding that level of production.
What drove prices lower was a Nigerian proposal that a further hike of a similar level should be left to the discretion of the Opec president. Such an increase, if implemented, would be “real oil” the president said.
Crude oil was also under pressure from profit-taking earlier in the day after climbing 4 per cent in the previous session on distillate supply fears.
In New York, Nymex West Texas Intermediate for July delivery settled $1.05 down at $53.73, having risen $2.11 on Monday.
Brent Crude for July delivery fell 62 cents to $55.00. The July contract expires at close of trading on the International Petroleum Exchange on Wednesday. The August contract was down 57 cents at $55.20.
“Macro risks look skewed to the upside, demand signals remain robust, supply remains uninspiring, and now inventories look set to move into a period of seasonal draws,” oil analysts at Citigroup Smith Barney said.
Crude stocks in the US are at six year highs, a level which is expected to change little when the weekly inventory figures are released this afternoon by the US Energy department. Distillates are seen rising 1.2m barrels and gasoline stocks climbing by 600,000 barrels.
“If we get yet another distillate build this week, we would, in effect, have two back-to-back increases in inventories, despite stronger demand,” Edward Meir, of Man Financial, said. “This could perhaps spark a rather good sized retrenchment in a market that, in our view, is moving higher mainly on perceived distillate problems and little else.”
Gold eased $1.85 to $426.90/7.60 as investors took profits after US data eased inflation worries.
“Gold has outperformed most major currencies, suggesting the recent strength is not just a rejection of the dollar and the euro, but is perhaps the beginnings of a more sustained independence from currency markets,” Alan Williamson of HSBC said.
Copper failed to rise above the $3,280 resistance level, easing $23 to $3,254 a tonne.
Zinc fell to $1,262 a tonne, down $16 as stocks on the London Metal Exchange’s books have risen 20 per cent in the last three days to a four-and-a-half month high.
