Oil dips from record but edgy over Mideast
Oil dips from record but edgy over Mideast
Reuters, London
Oil prices slipped on Tuesday from highs touched after the death of Saudi Arabia's King Fahd, but nagging fears over the longer term stability of the world's top oil exporter cushioned the fall.
U.S. light sweet crude for September delivery fell 64 U.S. cents to US$60.93 a barrel, after hitting a peak of $62.30 a day earlier.
London Brent crude lost 67 U.S. cents to $59.77 a barrel, after also jumping to a record highs of $60.98 on Monday.
Product prices also weakened ahead of the next set of U.S. inventory data on Wednesday, which is expected to show a further increase in distillate stocks, including diesel and heating oil.
Oil surged on Monday on news of Fahd's death, even though his successor Crown Prince Abdullah has been de facto ruler of the kingdom since Fahd suffered a stroke in 1995.
Saudi officials stressed King Fahd's death would not lead to any change to oil policy, and King Abdullah offered a further sign of stability by retaining all ministers.
Saudi Arabia, the leading member of the OPEC cartel, is pumping about 9.5 million barrels per day (bpd) of crude and has vowed to keep spare production capacity of 1.5 million to 2.0 million bpd to meet any supply shortfalls.
Yet there were fears Fahd's death might stir an era of uncertainty over Saudi Arabia's longer-term policies as the new king is over 80 years old, opening the way for a succession struggle between conservatives and reformers.
"(King Fahd's death) was a catalyst for some people to look more closely at the family than perhaps they did and they realized the new king is 83," said Mark Keenan of MPC Commodity Fund in London.
"There is still geopolitical risk in the market, we confirmed that yesterday," Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures said.
Worries over U.S. policy toward Iran also kept markets on tenterhooks after Tehran, in defiance of EU warnings, said on Monday it had begun preparations to resume nuclear work that the West suspected could help it build an atom bomb.
Political worries in the Middle East underscored the fragility of the global supply system at a time when U.S. demand is growing strongly, testing refiners' ability to supply enough fuels. U.S. inventory data on Wednesday will be closely watched.
Analysts forecast a one million barrel fall in crude inventories, a 1.8 million barrel increase in distillate stocks and an 800,000 barrel fall in gasoline stockpiles.
Traders said the decrease in crude stocks was unlikely to worry the markets unduly, given that supplies of crude have been swollen by the highest OPEC output for a quarter of a century.
If confirmed, the expected increase in distillate stocks would be the 11th increase in a row, and would further soothe worries that high demand could deplete inventories.
U.S. gasoline demand is some 2.4 percent higher than a year ago and distillate demand is running strong at 3.6 percent.