Crude futures declined after three days of gains, dropping below $100 a barrel amid signs Saudi Arabia is increasing its output of oil.
Light, sweet crude for July delivery was down $2.61, or 2.6%, at $99.32 a barrel in midmorning trade on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $1.11 lower at $118.46 a barrel.
Oil refiners in Asia said Friday that Saudi Arabia, the world’s largest crude exporter, is offering more crude to buyers for July.
The action signals the kingdom is following through on its pledge to meet world oil demand despite a failure of the Organization of Petroleum Exporting Countries this week to approve a production increase.
At OPEC’s meeting Wednesday, Gulf states led by Saudi Arabia pushed a plan to raise production quotas by 1.5 million barrels a day. But six OPEC members, including price hawks Iran and Venezuela, opposed the increase.
Public sparring ensued following the meeting, highlighting cracks between member states and raising uncertainty, though some analysts said it is unlikely there will be any supply issues.
“The organization may have lost a lot of credibility but from a fundamental perspective nothing much has changed. Production is well above quotas and Saudi Arabia guarantees to ship as much oil as the market asks for,” said Filip Peterson, a strategist at SEB Commodity Research, in a client note.
Supply issues have combined with worries about an economic slowdown to keep prices around $100 a barrel for most of the last month.
Most analysts expect oil consumption to continue to grow through 2011, particularly in the second half of the year when the global economy is expected to pick up speed. But economic data in recent weeks have led to concerns about how the recovery will progress amid an end to government stimulus programs and rising interest rates around the globe.
“We’re going to be here for a while, given $5 on the upside and the downside,” said Carl Larry, director of energy derivatives and research at Blue Ocean Brokerage. “One hundred dollars is the place where people feel comfortable now.”
Meanwhile, prices between the world’s two major oil benchmarks, U.S.-based West Texas Intermediate and Europe’s Brent, have again widened to record levels.
Brent crude is $19 higher than its U.S. counterpart, the widest gap on record.
