Oil extended declines as Saudi Arabia was said to be ahead of schedule in restoring its output capacity.
Futures lost as much as 2.9% in New York to the lowest level in more than a week. Saudi Aramco’s production capacity now exceeds 11 million barrels a day, beating a self-imposed deadline by about a week, according to people with knowledge of the situation. It has now restored production at the Abqaiq and Khurais oil processing facilities to the levels they were operating at before recent attacks.
Aerial strikes on the two plants on Sept. 14 disabled 5% of global crude supply, driving Brent crude higher by the most on record. Prices have since pulled back as Aramco -- formally known as Saudi Arabian Oil Co. -- has promised it will return all lost production by the end of this month, despite skepticism from consultants including Rystad Energy AS and FGE. A gloomy global economic outlook and weakening oil demand growth have also pushed oil lower.
“With the oil market reassured that no material disruption to Saudi supply to its customers has occurred following the drone attacks on the Abqaiq processing facility, the oil price pursues its retreat from last week’s highs,” said Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA. “The oil market dodged a bullet, but there is no guarantee that another drone attack will not be repeated in the future.”
West Texas Intermediate for November delivery dropped $1.51, or 2.6%, to $55.78 a barrel on the New York Mercantile Exchange at 10:10 a.m. local time. Brent for the same month slipped $1.76, or 2.8%, to $61.34 a barrel on the ICE Futures Europe Exchange, and traded at a $5.58 premium to WTI.
Saudi Arabia is showing it’s starting to resolve the worst output disruption in its history. There had been speculation that it would take months to repair the extensive damage caused by the attacks. Aramco had said on Sept. 17 that it will restore its production capacity to 11 million barrels a day by the end of September, while the full level of 12 million will only be available in November.
There was other bearish news for oil. The American Petroleum Institute reported a 1.38 million-barrel increase in U.S. crude stockpiles last week, according to people familiar with the data. The group also reported a 2.27 million barrel increase at the Cushing, Oklahoma, hub. If confirmed by the U.S. government, this would be the first increase after 11 weeks of declines. Energy Information Administration will publish weekly petroleum data at 10:30 a.m. in Washington.
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