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Oil near 3-week low amid talks to resolve Qatar spat

Bloomberg logoBloomberg 6/6/2017 Grant Smith

Oil traded near the lowest closing level in three weeks as diplomatic efforts to resolve a clash between Qatar and Saudi Arabia eased tensions in the world’s biggest energy-producing region.

Futures held steady in New York after sliding 2 percent the previous two sessions. Kuwait’s ruler will travel to Saudi Arabia on Tuesday to mediate an end to the feud between Qatar and a Saudi-led alliance, which accuses the Gulf state of terrorism links. Prices initially surged Monday before settling lower as the spat was seen having a limited impact on oversupplied world oil markets.

Oil is trading below $50 a barrel amid speculation that rising U.S. supply will counter production curbs by the Organization of Petroleum Exporting Countries and its partners, including non-OPEC member Russia. While American stockpiles have recently edged lower, output from the country has extended gains to the highest since August 2015.

“The rift provided a brief pillar of price support but these gains eventually fizzled,” Stephen Brennock, an analyst at PVM Oil Associates Ltd., said in a report. “Pervasive doubts surrounding OPEC’s attempt to normalize global stocks retained center stage.”

West Texas Intermediate for July delivery was at $47.31 a barrel on the New York Mercantile Exchange, down 9 cents, at 1:27 p.m. London time. Total volume traded was about 56 percent above the 100-day average. The contract lost 26 cents to $47.40 on Monday, the lowest close since May 10, after erasing an intraday gain of as much as 1.6 percent.

Brent for August settlement was down 15 cents at $49.32 a barrel on the London-based ICE Futures Europe exchange, after sliding 48 cents on Monday. The global benchmark crude traded at a premium of $1.87 to WTI for the same month, the narrowest since February.

U.S. inventories probably dropped by 3.5 million barrels last week, a ninth straight decline, according to a Bloomberg survey before the release of data from the Energy Information Administration.

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, probably decreased by 750,000 barrels, the forecast shows. American production has expanded to 9.34 million barrels a day, according to the EIA, which will release its weekly report on Wednesday.

Oil market news:

  • Qatar can still access shipping routes to deliver oil and gas to buyers after Saudi Arabia and other neighboring states barred the emirate from exporting through their territorial waters.
  • Indonesia has applied to become part of OPEC once again, according to Hadi Djuraid, a special adviser to Energy and Mineral Resources Minister Ignasius Jonan.
  • Oil bulls fatigued by the failure of prices to sustain rallies would welcome some words of encouragement from OPEC, according to Citigroup Inc.

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