The price of crude oil declined after topping $72 a barrel last week as a key Russian pipeline began resuming shipments and global oil flows appeared undisturbed days before tougher US sanctions against Iran kick in.
Russia said it solved an oil-contamination problem that halted some shipments to eastern Europe last week.
Waivers that allowed China and several other major buyers to purchase Iranian oil will expire May 2, cutting off a significant source of supply. Meanwhile, US president Donald Trump renewed calls on Opec to pump more crude. “We’re still getting weighed upon by the various commentary from President Trump and the calls on Opec to raise output”, said John Kilduff, partner at Again Capital, a New York hedge fund focused on energy.
Crude touched a six-month high last week after the White House announced the end of sanctions exemptions on Iranian crude. Investors are waiting to see whether Saudi Arabia will ramp up production to make up for any supply shortfalls after Trump said on Twitter he had spoken with suppliers about boosting oil flows and that “all are in agreement”.
The global benchmark Brent crude declined 32c to $71.83 a barrel in London. The US benchmark, West Texas Intermediate slid 38c to $62.92 a barrel in New York.
Saudi Energy Minister Khalid Al-Falih said last week that the world’s biggest oil exporter will cater to customers’ needs, but doesn’t see the need for an immediate response to the Iran situation.
Meanwhile, Neil Shearing, group chief economist at Capital Economics in London, said the spike in prices that had brought Brent crude oil up 45% from its lows at the end of last year, will unlikely last.
“It goes without saying the supply picture remains uncertain, and it seems unlikely that US pressure on Iran is going to abate. But prices are now at a level where US shale production is likely to crank up.
And we suspect Opec may raise output targets too. More fundamentally, we don’t think the better tone of some of the recent data will herald an upturn in fortunes for the world economy,” he said.