Brent oil fell from the highest level in four months after Saudi Arabia signaled it will keep pumping oil, raising concern that a global glut will deepen.
The European benchmark fell for the first time in four days. The kingdom will “supply any demand for Saudi oil,” Prince Abdulaziz bin Salman, Saudi Arabia’s deputy oil minister, told reporters Monday in the eastern city of Khobar. West Texas Intermediate crude dropped for a second day.
Oil prices have rebounded this month on speculation the falling rig count will reduce U.S. production and on concern that Saudi Arabia’s military campaign in Yemen will disrupt Middle East supplies. Signs of a global glut persist, with U.S. inventories at the highest level in 85 years.
“The Saudis are saying that they will keep pumping,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “The fundamentals really haven’t changed that much. The market went up a little bit too far too quick.”
Brent for June settlement slid 45 cents to $64.83 a barrel on the London-based ICE Futures Europe exchange. Prices reached $65.28 Friday, the highest since December. The European crude ended at a premium of $7.84 to WTI, the U.S. marker.
WTI for June delivery fell 16 cents to $56.99 a barrel on the New York Mercantile Exchange. Prices rose in the past six weeks and climbed to $57.74 on April 23. The volume of all futures traded was about 44 percent below the 100-day average.
Saudi Oil Minister Ali al-Naimi has stressed that his country won’t cede market share to higher-cost producers. He said in the capital Riyadh on April 7 that output was at 10.3 million barrels in March and would remain close to that. The increase in Saudi production has contributed to a global supply glut fed partly by U.S. shale oil.
U.S. crude inventories rose 5.3 million barrels in the week ended April 17 to 489 million, the highest level since 1930, according to the Energy Information Administration. Output will average 9.23 million barrels a day this year, the highest since 1972, according to the agency, and then rise to 9.31 million in 2016.
The U.S. oil rig count dropped by 31 to 703 last week, declining for a 20th week, Baker Hughes reported Friday. The Permian Basin of Texas and New Mexico lost the most, falling 13 to 242, said the Houston-based oilfield services company.
The decline in drilling rigs in the U.S. could bottom out in May, according to Morgan Stanley. Operators are already reviving operations in parts of Eagle Ford and Permian in Texas, analyst Adam Longson said in a report dated Monday.
“The market’s attention has to refocus on the staggering state of oversupply,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The prices are too high. They will go significantly lower rapidly.”
Crude gained earlier on concern the conflict in Yemen may threaten supplies. Saudi Arabia deployed National Guard troops to its southern borders, state-run Saudi Press Agency reported, a month after airstrikes were launched on Houthi rebels in Yemen.
An estimated 4.7 million barrels a day of crude and products were shipped through Bab el-Mandeb last year, up from 3.8 million in 2013, according to the EIA. Closing it would force tankers to sail around the southern tip of Africa to reach Europe and the Americas.
“The market is concerned about what’s going on in Yemen and about the falling rig count,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Inventories are still rising, but the continued drop in the rig count may ease the glut.”