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Oil dips as Saudi Arabia nears completion of oilfield expansion
[NEW YORK] Oil prices fell on Monday amid concerns about elevated US inventories and Saudi Arabia's reported imminent completion of a key oilfield expansion project, potentially adding to abundant global supplies.
US benchmark West Texas Intermediate (WTI) for delivery in June fell US$1.09 (2.5 per cent) to US$42.64 a barrel on the New York Mercantile Exchange.
In London, Brent North Sea crude for June, the European benchmark, closed at US$44.48 a barrel, down 63 cents (1.4 per cent) from Friday's settlement.
Both contracts had clocked weekly gains in the past three weeks.
Phil Flynn of Price Futures Group noted that prices chopped between gains and losses Monday in light volume.
"They turned lower when Genscape, the private forecaster, showed an increase in crude supplies in Cushing, Oklahoma," Flynn said.
US commercial crude supplies are currently near historic highs and traders keep a close eye on the levels at the Cushing oil terminal, where the supplies serve as the price basis for WTI contract. The Department of Energy reports on stockpiles report on Wednesday.
Bloomberg News meanwhile reported that the Saudi state oil company Aramco will complete an expansion of its Shaybah oilfield by the end of May, allowing the world's largest exporter to maintain total capacity at 12 million barrels a day.
The move will see Shaybah's capacity rise from 750,000 barrels to 1.0 million barrels a day.
The report caused "market jitters", said Bernard Aw, an analyst with IG Markets in Singapore.
"If the Saudis ramp production up by a substantial amount, the US$40 mark should be easily broken. That creates a problem that we're not even going to see the oil market rebalance, not even by the first half of next year," he told AFP.
Separately Saudi Arabia unveiled a sweeping reform plan to wean its economy away from oil dependence. The measures include the possible public offering of less than five percent of Aramco, which a top prince said is worth in total US$2 trillion to US$2.5 trillion.