Oil Prices Steady on Saudi Crude Production Decline

Oil prices were steady and firm on Monday after Saudi crude production recorded an unforeseen decline in July, while American shale drilling seemed to be stagnant.

Markets also awaited an announcement from Washington later on Monday on renewed US sanctions against top oil exporter Iran.  So-called “snapback” sanctions are set to be reinstated on Tuesday, according to a US Treasury official.

Spot Brent crude oil futures traded at $73.23 per barrel on Monday, higher 2 cents from their previous close.

US West Texas Intermediate crude futures were 15 cents higher, or 0.2 percent, trading at $68.64 per barrel.

oil prices drop with arrows pointing down in the background

US energy companies last week cut oil rigs for the second time during the past three weeks as the rate of growth slowed during the past couple of months.

Drillers have slashed two oil rigs in the week to August 3, bringing the total count lower to 859, said Baker Hughes energy services firms on Friday.

Many US shale oil drillers recorded disappointing quarterly results in recent weeks, blown by rising operating costs, hedging losses and a drop in crude prices away from 2018 highs, which were reached between May and July.

Outside the United States, major crude exporter Saudi Arabia produced around 10.29 million barrels per day of crude in July, according to two OPEC sources, down about 200,000 barrels per day from a month earlier.

That decrease came in spite of a promise by the Saudis and top producer Russia in June to spur output from July.  Saudi Arabia pledged a “measurable” supply boost.

US investment bank Jefferies said in a note that “the Saudi and Russian production surges appear to be limited” than initially expected.  It also said that the bullish market sentiment was fueled by the inevitable reinstatement of US sanctions against Iran.

Even so, Russia, the United States, and Saudi Arabia are now all producing 10 million to 11 million barrels per day of crude.  Just these three countries now meet around a third of global oil demand.

In spite of the firm prices on Monday, traders said one relief to the markets was the announcement from Saudi Arabia over the weekend that the oil shipments routed through the Red Sea in the lane of Bab al-Mandeb had been continued.

Saudi Arabia had temporarily stopped the oil shipments through the said lane on July 25 after the attacks on two oil tankers by Yemen’s Iran-aligned Houthi movement.

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