Brent oil falls to three-week low on OPEC; WTI discount slips
LONDON (Bloomberg) -- Brent crude dropped to the lowest level in almost three weeks as OPEC production climbed and Libya said an export terminal would reopen. The European benchmark’s premium to West Texas Intermediate oil narrowed.
OPEC crude production increased in May for the first time in three months, a Bloomberg survey showed. Libya’s Hariga port is set to resume operating within two days after authorities approved salary payments to Petroleum Facilities Guard members who are preventing loadings, according to the country’s National Oil Corp. Futures gained earlier after a report showed China’s Purchasing Managers’ Index advanced.
“Rising OPEC production will help keep a lid on prices,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “As things right themselves in places like Libya, the market will come under further pressure.”
Brent for July settlement fell 67 cents, or 0.6%, to $108.74 a barrel on the London-based ICE Futures Europe exchange at 1:07 p.m. in New York. Futures touched $108.71, the lowest intraday price since May 13. The volume of all futures traded was 2% below the 100-day average for the time of day.
WTI for July delivery slipped 57 cents, or 0.6%, to $102.14 on the New York Mercantile Exchange. Volume was 33% lower than the 100-day average. Prices are up 3.8% this year. The U.S. benchmark crude traded at a $6.60 discount to Brent, down from $6.70 on May 30.
Brent, which is used to price more than half of the world’s oil, is typically more sensitive to changes to the global supply-and-demand balance.
Organization of Petroleum Exporting Countries production rose by 75,000 bpd to an average 29.988 million last month, according to a Bloomberg survey of oil companies, producers and analysts on May 29. Saudi Arabia, the group’s biggest producer, bolstered output by 70,000 bpd to 9.67 million, the country’s first gain this year.
OPEC ministers will next meet on June 11 in Vienna to discuss production targets.
In Libya, two tankers are waiting to load at Hariga and the terminal “should reopen soon,” Mohamed Elharari, a spokesman for National Oil Corp., said by phone from Tripoli yesterday, June 1. The nation has become the smallest producer in OPEC during the past year as unrest disrupted output and shipments.
“The news that a port in Libya is about to reopen, along with the increase in Middle Eastern production, is putting Brent under pressure,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The fundamentals don’t support these prices so we should see them continue to move lower. WTI should soon test $100.”
Russian crude and condensate output climbed to 10.53 MMbpd in May, up 0.6% from a year earlier, according to data emailed from the Energy Ministry.
China’s PMI increased to 50.8 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing in Beijing reported yesterday, June 1. The PMI is the highest since December and surpasses the median estimate of 50.7 in a Bloomberg News survey of economists. April’s level was 50.4, with readings above 50 indicating expansion.
The nation will account for about 11% of global oil demand this year, compared with 21% for the U.S., forecasts from the International Energy Agency in Paris show.