Oil futures took a hit on Friday to tally a loss for the week as traders bet on a further rise in Saudi crude output, worried about energy demand on the heels of Greece’s ongoing debt drama and monitored negotiations over Iran’s nuclear program.
On the New York Mercantile Exchange, July crude slumped 84 cents, or 1.4%, to settle at $59.61 a barrel. Tracking the most-active contracts, prices saw a weekly decline of 0.6%. August Brent crude on London’s ICE Futures exchange fell $1.24, or 1.9%, to $63.02 a barrel. Prices were down 1.3%, based on the most-active contracts. The oil market is “weighing the comments from the Saudi oil minister who confirmed that his country will pump more if demand improves,” said Naeem Aslam, chief market analyst at AvaTrade.
Members of the Organization of the Petroleum Exporting Countries “have already produced more oil in the past 12 months than their forecast and these comments has further fueled the arguments that the organization will continue producing a lot more,” said Aslam. OPEC output in May rose to 31.11 million barrels a day, as output from Saudi Arabia rose to 10.25 million barrels a day, according to a Platts survey released earlier this month. Total output surpassed the group’s production ceiling of 30 million barrels a day. Analysts have said that OPEC and top member Saudi Arabia haven’t lowered the output ceiling because of a battle with non-OPEC producers for market share. “The Saudis talking about raising production sounds desperate to me,” said Phil Flynn, senior market analyst at Price Futures Group. “If they do, kiss their spare capacity goodbye.” Saudi oil minister Ali Naimi said he was optimistic about the future of the oil market in the coming months in terms of continuing improvement and increasing global demand, the Saudi Press Agency reported. Saudi Arabia and Russia signed a petroleum cooperation agreement on Thursday, which reportedly includes working together on nuclear energy development.
Worries about a Greek debt default also put pressure on oil. A default could “push Europe into a recession and slow what had been improving European Union demand,” said Flynn. Oil investors also looked for news ahead of a potential Iranian nuclear deal, whichcould result in more oil supply hitting the market. The agreement deadline is June 30. Baker Hughes data Friday, meanwhile, showed a 28th straight weekly fall in the number of U.S. rigs actively drilling for oil.