Oil prices dropped by more than one percent on Monday, driven by the prospects of rising output from Saudi Arabia, as US President Donald Trump pushed the world’s major oil producer to offset disruptions across the globe.
US Nymex futures fell 1.2 percent to $73.26 per barrel (pb) early on the day from their last trading session, after surging more than eight percent last week, while global benchmark Brent crude futures dropped 1.1 percent to $78.35 pb, from their last settlement.
It is worth noting that unplanned outage at Syncrude in Canada and disruptions from the Organisation of the Petroleum Exporting Countries’ (OPEC) members Venezuela to Libya as well as looming US sanctions against Iran, OPEC’s third-largest producer, have triggered fears over supply shortfalls.
Nevertheless, President Trump on Saturday said on Twitter that Saudi Arabia’s King Salman bin Abdulaziz agreed to ramp up the GCC country’s oil production.
Moreover, the output from the OPEC kingpin nation rose 700,000 barrels per day (bpd) to a record high of 10.72 million bpd since November 2016, according to a Reuters survey on Friday, exceeding the amount required for offsetting the shortage caused by disruptions.
However, markets remained tight driven by escalating trade disputes between the US and the world’s major economies, including China, the European Union (EU), India and Canada, as well as looming Washington sanctions against Iran, Reuters reported.
A medium-intensity trade dispute would likely hamper the global economic growth by at least 0.5 percent, “before accounting for tighter financial conditions and sentiment shocks,” US bank JP Morgan stated in a note.
As the Trump administration plans to cut Iranian crude exports, “we must all be prepared for a potentially major price volatility ahead,” given that from 2.4 to 2.7 million bpd of the country’s output is at risk by the end of the year, energy consultancy FGE said in a note.
By 7:26 am GMT, US Nymex futures fell 0.66 percent to 73.66 pb, while Brent crude futures plunged 1.07 percent to 78.38 pb.