Sep 18, 2012, 05.07 PM | Source: Reuters
Oil slipped to around USD 113 a barrel on Tuesday, extending the previous session's steep slide, on concerns about slowing global growth and signs that Saudi Arabia is pumping at high rates to dampen prices.
A senior Gulf source said Saudi Arabia, the top crude exporter, was pumping around 10 million barrels per day - near the highest rate in decades - and added a majority of OPEC producers wanted oil prices around USD 100.
"It would seem they want to talk the market down," said a London-based trader.
Brent crude for November dropped 63 cents to USD 113.16 a barrel at 0936 GMT. On Monday, it tumbled from USD 115.20 at 1752 GMT to USD 111.60 in the space of three minutes. US crude was trading 57 cents lower at USD 96.05. On Monday, it slipped around $4 in the same three-minute period.
The drop in Brent on Monday followed a seven-day rally and traders said it appeared to have stemmed from computer-based trading and rumours of an imminent release of crude from the US Strategic Petroleum Reserve.
"The dramatic sell-off does not appear to have been driven by anything fundamental in the market. It looks as though it was triggered by computer trading system-type selling," said Tony Machacek, an oil futures broker at Jefferies Bache.
"We've seen a steady increase in prices, so maybe the market was a bit overbought and susceptible to a long-liquidation move to the downside."
The U.S. Commodity Futures Trading Commission said it was looking into the drop in prices and checking with exchange operators CME Group
"There is some talk about a hedge fund liquidating positions," said a Singapore-based trader at an investment bank on Tuesday.
European shares and the euro slipped on Tuesday as investors turned their attention from central bank stimulus to slowing global growth and uncertainty about Spain's willingness to seek an international aid package.
"To a certain extent there are still a lot of questions about the economy," said Jim Ritterbusch, president of energy consultants Ritterbusch & Associates in Galena, Illinois.
"All eyes are on China now to see if the government there will increase their stimulus spending programme."
Oil remains supported by anti-Western demonstrations over a film mocking Islam's Prophet Mohammad and escalating tensions between the West and Iran over its nuclear programme. The tensions heighten the risk of supply disruptions in the region.
The White House said on Monday it was still considering a release from the SPR but declined to provide more details and made no further announcement after the big dip in crude prices.
The latest weekly reports on US commercial inventories are expected to show crude stocks rose due to restart of Gulf Coast refinery activity after the passage of Hurricane Isaac.
Later on Tuesday, the American Petroleum Institute will release the first of this week's inventory reports.