Oil extends losses as Saudi looks to restore output by Sept-end

But financial markets are likely to be more cautious about geopolitical tensions in Middle East, analysts say.

oil pump bakersfield - reuters
The price of oil surged more than 15 percent to a four-month high on Monday amid concerns that the attacks on Saudi Arabia's oil facilities would disrupt global supply [File: Lucy Nicholson/Reuters]

Oil prices extended their losses from the previous session on Wednesday after Saudi Arabia‘s energy minister said the kingdom will restore lost oil production by the end of the month.

But investors remained cautious of potential tension in the Middle East after the United States said it believes the attacks that crippled Saudi Arabian oil facilities last weekend originated in southwestern Iran. Iran has denied involvement in the attacks.

Brent crude oil futures fell 36 cents, or 0.6 percent, to $64.19 a barrel by 00:05 GMT, after tumbling 6.5 percent the previous session.

US West Texas Intermediate (WTI) crude futures fell 43 cents, or 0.7 percent, to $58.91 a barrel, after sinking by 5.7 percent on Tuesday.

“In view of the vulnerability of Saudi’s supply chain and the likelihood that such attacks could be repeated in the future, we expect the market to reprice the geopolitical risk premium in oil,” BNP Paribas’ Harry Tchilinguirian said in a note.

“The oil market has so far been complacent about recent developments in the Middle East. In our opinion, this will no longer be the case going forward.”

Saudi Arabia sought to reassure markets after the attack on Saturday halved oil output, saying on Tuesday that full production would be restored by month’s end.

Energy Minister Prince Abdulaziz bin Salman said on Tuesday that average oil production in September and October would be 9.89 million barrels per day and that the world’s top oil exporter would ensure full oil supply commitments to its customers this month.

Saudi Aramco has informed some Asian refiners that it will supply full allocated volumes of crude oil in October, albeit with some changes.

Still, risks to oil prices remained after a US official said that Washington believes the attacks originated in southwestern Iran.

Relations between the US and Iran have deteriorated since US President Donald Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on its oil exports.

Tehran rejects the charges it was behind the attacks and on Tuesday ruled out talks with Trump.

US crude inventories rose by 592,000 barrels in the week ended September 13 to 422.5 million, data from industry group the American Petroleum Institute showed on Tuesday. Analysts had expected a decrease of 2.5 million barrels.

Official US government data will be released on Wednesday. 

Source: Reuters