Oil Extends Decline as Saudi Arabia, Russia Signal Output Boost

Oil prices fall as supply from top three producers set to rise

Oil prices fall as supply from top three producers set to rise

Concerns that Saudi Arabia and Russian Federation could boost output have exerted downward pressures on oil prices, along with rising production in the United States.

Crude futures in NY slid 1.6 percent on Tuesday after tumbling 4 percent on Friday.

Meanwhile, market participants would also be waiting for the latest U.S. inventory data levels which is delayed by a week because of the Memorial Day holiday in the US.

Saudi energy minister Khalid Al-Falih said during a CNN-hosted panel in St. Petersburg, Russia, that he was in intensive discussions with Russia and other OPEC nations to pump more oil to ease global supply concerns.

As Russia and Saudi Arabia deliberated on an increase in oil output of 1 million/bpd to offset supply reductions from Iran and Venezuela, Brent crude prices fell to $75.34 a barrel, down nearly 6 per cent from the peak of $80 reached earlier in May.

Saudi Arabia and Russia's potential policy shift doesn't materially change Goldman Sachs Group Inc.'s bullish oil outlook, the bank's analysts including Damien Courvalin said, reiterating a forecast of Brent at US$82.50 in the third quarter.

"Now the market is digesting that information".

U.S. West Texas Intermediate (WTI) crude fell $1.39 to $66.49 a barrel. Futures are headed for a 5th straight session of declines, the longest such stretch since February 9. Prices dropped US$2.83 to US$67.88 on Friday, the biggest loss since July 5.

Brent crude futures were at $75.34 per barrel at 7 am, down $1.10, or 1.4 per cent, from their last close.

Heightened geopolitical risks and market fears of a looming supply shock pushed oil prices to their highest level in May in almost four years.

A return to the oil production levels that were in place in October 2016, baseline for the current deal to cut output, is one of the options for easing curbs, Russia's energy minister said on Saturday.

Saudi Arabia, recently made a decision to do an initial public offering (IPO) of its state-owned company Aramco, and the future valorisation of the company will be based on the price of oil.

Indian Oil Corp bought 3 million barrels earlier this month via a tender, while Reliance Industries purchased up to 8 million barrels, the sources said, although it wasn't clear if Reliance's cargoes would all load in June.

"While all roads are pointing to OPEC raising production, the real question is by how much", Stephen Innes, head of trading at Oanda Corp., said in a note. An upswing in crude futures has largely been driven by OPEC-led production cuts and robust global demand.

Saudi Arabia clearly in favour of higher oil pricesThe success of Saudi Arabia's fiscal deficit target is dependent on oil prices.

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