Oil prices slumped on Monday, extending steep declines from Friday, as Saudi Arabia and Russia said they may increase supplies and as US production gains show no signs of abating.
Brent crude futures were at $75.09 per barrel at 0452 GMT, down $1.35, or 1.8 percent, from their last close. US West Texas Intermediate (WTI) crude futures were at $66.22 a barrel, down $1.66, or 2.5 percent. Brent and WTI have fallen by 6.4 percent and 9.1 percent respectively from peaks touched earlier in May.
In China, Shanghai crude oil futures tumbled by 4.8 percent to 457.7 yuan ($71.64) per barrel.
The Organization of the Petroleum Exporting Countries (OPEC), as well as top producer but non-OPEC member Russia, started withholding supplies in 2017 to tighten the market and prop up prices, which in 2016 fell to their lowest in more than a decade at less than $30 per barrel.
But prices have soared since the start of the cuts last year, with Brent breaking through $80 per barrel earlier in May, triggering concerns that high prices would crimp economic growth and stoke inflation.
“The pace of the recent rise in oil prices has sparked a debate among investors on whether this poses downside risks to global growth,” Chetan Ahya, chief economist at US bank Morgan Stanley, wrote over the weekend in a note.
To address potential supply shortfalls, Saudi Arabia, de-facto leader of producer group OPEC, as well as top producer Russia said on Friday they were discussing raising oil production by some 1 million bpd.
“Crude oil prices collapsed … after reports emerged that Saudi Arabia and Russia had agreed to increase crude oil production in the second-half of the year to make up for losses elsewhere under the production cut agreement,” ANZ bank said on Monday.
Meanwhile, surging US crude production also showed no sign of abating as drillers continue to expand their search for new oil fields to exploit.
US energy companies added 15 rigs looking for new oil in the week ended May 25, bringing the rig-count to 859, the highest level since 2015, in a strong indicator that American crude production will continue to rise.
US crude production has already surged by more than 27 percent in the last two years, to 10.73 million barrels per day (bpd), bringing its output ever closer to Russia’s 11 million bpd.
Source Credit: Arab News