Oil prices fell 2 percent on Tuesday as investors took profit from a two-day rally fueled by speculation Britain will stay in the European Union, paring some losses after rebels sabotaging Nigeria’s crude exports denied a one-month cease-fire agreement.
The Niger Delta Avengers’ denial comes after government officials earlier told Reuters a one-month cease-fire had been agreed last week following talks between the oil minister, community groups and state governors in the Niger Delta, the source of most of Nigeria’s crude oil.
Brent crude futures’ front-month, August, was down 98 cents, or 1.9 percent, at $49.67 a barrel by 1615 GMT, after falling to $49.46 earlier. The contract had gained 7 percent in the last two sessions.
US crude futures’ expiring July front-month contract was down $1.10, or 2.2 percent, at $48.27 a barrel. The more actively traded August contract, the new front month from Wednesday, was down $1.07, or 2 percent, at $48.30.
Oil prices had dropped early in Asian trade after a strong two-day rally that was fed by easing concerns Britain would leave the European Union after a referendum this week, allowing market participants to focus on supply issues.
Two opinion polls on Monday suggested support for Britain staying in the EU had recovered some ground following the murder of a pro-EU lawmaker last week, although a third survey found backers of “Brexit” ahead by a whisker. Analysts fear a British departure would cause global economic turmoil.
Caution ahead of weekly US supply-demand statistics for oil also weighed on crude futures, traders said.
A Reuters poll forecast US crude stockpiles fell 1.9 million barrels last week, declining a fifth week in a row. The American Petroleum Institute will release its own inventory at 2030 GMT, ahead of official inventory numbers from the US government on Wednesday.
Saudi Arabia’s crude oil exports dropped in April despite high production, suggesting its battle for market share against US shale drillers may be running its course.
But Russia beat out Saudi Arabia as China’s largest oil supplier in May, the third month in a row it topped the list, highlighting a still-fierce battle for market share.
Additionally, with oil prices up more than 30 percent this year, shale drillers are looking at turning the taps on again and have proven resilient beyond Saudi and OPEC expectations.
Iran has also increased crude export capacity at its main terminal on Kharg Island to allow eight tankers to load simultaneously.
Source: Arab News