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Oil drops as Saudis signal likely supply boost

May 27 2018 09:39

New York - Global oil prices fell on Friday after top producer Saudi Arabia signaled a likely boost in supply as soon as the third quarter, and world stock markets were mixed over the sudden US move to cancel the summit with North Korea.

Saudi oil minister Khaled al-Faleh said at an economic conference in Russia that a gradual output increase could happen in the second half of the year to prevent any supply shocks, according to the RIA Novosti agency.

Benchmark crude prices tumbled almost $3 per barrel in London and fell more than $2 in New York. Oil stocks were likewise hammered as a result, with US supermajor Chevron falling 3.5%.

The weakened energy stocks weighed on Wall Street's performance, with the Dow Jones Industrial Average and S&P 500 each lost 0.2% for the day.

Russia's oil tsar Alexander Novak said ministers from OPEC and other members of the production pact would discuss how much to increase production next month.

"If we come to a common opinion that it is necessary" to increase supply it "should probably take place from the third quarter," Novak said, according to RIA Novosti.

The lackluster finish in New York came amid light trading volume ahead of a three-day holiday weekend, the traditional start of the US summer when many market players are on vacation.

Quincy Krosby, chief market strategist at Prudential Financial, said that more than simply reacting to oil prices, traders were seeking to reduce their exposure to global uncertainties ahead of the holiday.

"You don't want to stay in the market for a long weekend with the uncertainties surrounding North Korea as well as the situation in the middle-east with Iran," he told AFP.

Geopolitical confusion

London and Frankfurt stock indices finished the week slightly higher, while Paris was essentially flat at the close as investors hesitated amid the confusing series of reports on geopolitics.

President Donald Trump on Friday raised the possibly of pressing ahead after all with a June summit with North Korea, barely 24 hours after abruptly calling the meeting off.

That news followed on the heels of the Trump administration's announcement it was considering imposing duties on auto imports, which threatens to disrupt a crucial North American industry and anger major US trading partners who are already in fraught trade talks with Washington.

US markets will be closed on Monday in observance of Memorial Day.

Asian markets mostly fell on Friday after the news of Trump's cancellation of the summit.

"It looks like we are back to fire and fury as the modus operandi for the White House again after President Trump (threatened) a new 25% car import tariff and cancelled the summit with North Korea," said Greg McKenna, chief market strategist at AxiTrader.

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commodities  |  international markets
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