Oil fell more than $1 to below $77 a barrel on Monday after some funds booked profits as OPEC expressed concern over near record prices and pledged to pump more crude if needed.
London Brent crude, now more reflective of global prices than US oil, traded at $76.54 by 1450 GMT after sliding as much as $1.22 to $76.42 a barrel. It hit $78.40 last week, just shy of its all-time high of $78.65 hit last August.
US crude traded $1.16 lower at $74.63. “There has not been any positive news over the weekend and we could be seeing some profit taking by funds with long positions,” one trader said. OPEC President and United Arab Emirates Energy Minister Mohammed al-Hamli said on Sunday that oil’s strength was a worry but the world economy was still growing in spite of it.
“The statement is important as it could be the first indication that OPEC may be willing to consider easing up on its supply allocations at its September meeting, and could be accounting for the softer opening we are seeing so far today,” a Man Financial report said.
A report citing the head of OPEC’s research division saying a fair price for producers and consumers would be around $60-$65 also weighed on the price. Consumer governments have called repeatedly on the Organisation of the Petroleum Exporting Countries to boost output to ease high prices. But OPEC has resisted so far, saying crude supplies are more than ample.
“If we see there is a need for more oil, we will supply more. But if we supply more now, it will go straight to stocks,” the OPEC president told Reuters. “Whether we are going to have to change by the end of the year, I don’t know.”
OPEC is scheduled to meet next on September 11 in Vienna. Other analysts said OPEC’s comments were unlikely to have a lasting impact on prices, given lingering supply worries. Analysts expect funds, which have been an important force in the latest oil rally, to set the near-term tone for oil prices, especially when most of them decide to book profits.
Data from the US Commodity Futures Trading Commission last week showed net long positions of speculators on the New York Mercantile Exchange crude oil market had fallen in the week to July 17 from record highs in the preceding week. “Some of them (funds) have huge profits in their books. Some are long since $60 a barrel. That’s huge money to cash in,” said Frederic Lasserre, head of commodities research at SG CIB.
“There is this idea that there could be massive selling as soon as we touch last year’s historical highs... And like last year, once you start to see the funds start taking profits, the downward spiral can be quite rapid.”
“The risk is for a near-term pull-back in oil,” added Citigroup in a research note. Even as oil hovers near record highs, global economies are proving resilient to surging energy prices and oil consumption has remained strong.
Economic growth in China, the world’s second-largest oil consumer, accelerated to 11.9 per cent in the second quarter, an 11-1/2-year high, though Reuters calculations show apparent oil demand growth was more tepid at 2.1 per cent in June.
Your Ads At Here
