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Oil futures kicked off the second half of the year with sharp losses on Monday, as investors got rattled by a weekend tweet from President Donald Trump who hinted of a big potential production increase from Saudi Arabia.
August light, sweet crude on the New York Mercantile Exchange was recently down 63 cents, or 0.9%, to $73.51 a barrel. September Brent fell around $1, or 1.2%, to $78.25 a barrel.
WTI crude notched another finish at its highest since November 2014 on Friday, while also logging strong weekly, monthly, quarterly and first-half 2018 gains. Prices have driven higher by long-running efforts by the Organization of the Petroleum Exporting Countries to reduce production, anticipated increases in demand and supply disruptions.
Brent crude logged its best finish since May on Friday, after also seeing strong gains in the first half of the year.
Last week’s surge to fresh 3 1/2-year highs for the U.S. benchmark was somewhat disconcerting, said Barnabas Gan, an economist at Overseas-Chinese Bank. He added that the language in Trump’s weekend tweet — which suggested that Saudi Arabia may increase output by 2 million barrels a day — left scope for wide interpretation.
Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference...Prices to high! He has agreed!
— Donald J. Trump (@realDonaldTrump) June 30, 2018
A senior Saudi Arabia official told The Wall Street Journal on Saturday that no specific promise had been made over production, but rather assurances were given that the country had the capacity to meet demand.
A White House statement released that same evening backed off that tweet from Trump, according to reports. It said King Salman of Saudi Arabia had told the president that his country would increase oil production “maybe up to 2,000,0000 barrels.”
Saudi Arabia, OPEC’s swing producer, and Russia reached an agreement at a closely watched Vienna meeting last weekend to raise output less aggressively than had been anticipated.
Meanwhile, on Friday, Baker Hughes reported that the number of U.S. rigs drilling for oil declined by four to 858 this week. It logged a second-weekly fall in a row.
Among other energy contracts, September gasoline shed 1% to $2.109 a barrel, while September heating oil moved down 1% to $2.192 a gallon. September natural dropped 0.8% to $2.877 per million British thermal units.