SINGAPORE — Brent crude edged towards $125 a barrel yesterday, pulling back from sharp losses a day earlier, as a surprise drawdown in US crude stocks and a weaker dollar offset the prospect of a ramp up in supply by top exporter Saudi Arabia.
Industry data showed an unexpected 1,4-million-barrel decline in crude stockpiles last week, but comments by the Saudi Oil minister that the kingdom was prepared to meet any supply shortfall are expected to keep a lid on gains.
“The lower stocks are giving support to the market, but the Saudi comments will put a short-term cap on the oil price, and ease fears of supply issues emanating out of Iran,” said Ben Le Brun, market analyst with OptionsXpress in Sydney.
Brent crude gained 31 cents to $124,43 a barrel by 0720GMT, after falling more than a dollar in the previous session on the Saudi comments.
US crude was up 58 cents at $106,65. The benchmark plunged more than 2% on Tuesday.
Oil prices also received a boost after the greenback fell 0,3% against a basket of currencies, making dollar-denominated commodities cheaper when purchased in other currencies.
US crude stockpiles fell 1,4 million barrels in the week to March 16, data from the American Petroleum Institute showed, compared with analysts’ expectations for a 2,4 million barrel build.
Crude stocks at Cushing, Oklahoma, the delivery point for the benchmark West Texas Intermediate crude, fell 194 000 barrels, data showed.
The market awaited inventory data from the US Energy Information Administration yesterday for confirmation of the drawdown.
China’s crude inventory was also lower last month, with commercial stocks falling 3,77% by the end of February from a month earlier, official news agency Xinhua said yesterday.
Saudi Arabia sought to soothe fears about high oil prices, saying on Tuesday world supplies were well in excess of demand and crude at $125 a barrel was not justified, given the anaemic state of the world economy.
Saudi Oil minister Ali al-Naimi said the kingdom had met all its customers’ requests for oil and stood ready to raise output to full capacity of 12,5 million barrels per day, if needed.
At more than $124 a barrel, Brent is trading just $23 short of an all-time high, as tighter Western sanctions on Iran threaten to slow the country’s exports.
China imported a record 1,39 million barrels per day of crude oil from Saudi Arabia in February, 38,6% higher than a year earlier, while slashing Iranian imports by around 40%, official data showed yesterday.