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London - Oil traded near the lowest closing level in three weeks as diplomatic efforts to resolve a clash between Qatar and Saudi Arabia eased tensions in the world’s biggest energy-producing region.
Futures were little changed in New York after sliding 2% in the previous two sessions. Kuwait’s ruler will travel to Saudi Arabia on Tuesday to mediate an end to the feud between Qatar and a Saudi-led alliance, which accuses the Gulf state of terrorism links.
Prices initially surged on Monday before settling lower as the spat was seen having a limited impact on world crude markets, which remain oversupplied.
Oil is trading below $50 a barrel amid speculation that rising US supply will counter production curbs by the Organisation of Petroleum Exporting Countries and its partners, including non-OPEC member Russia. American stockpiles have edged lower, but output has extended gains to the highest since August 2015.
“The rift provided a brief pillar of price support but these gains eventually fizzled,” Stephen Brennock, an analyst at PVM Oil Associates, said in a report. “Pervasive doubts surrounding OPEC’s attempt to normalize global stocks retained center stage.”
West Texas Intermediate for July delivery was at $47.33 a barrel on the New York Mercantile Exchange, down 7 cents, at 10:54. Total volume traded was about 85% above the 100-day average. The contract lost 26c to $47.40 on Monday, the lowest close since May 10, after erasing an intraday gain of as much as 1.6%.
Brent for August settlement was down 7c to $49.40 a barrel on the London-based ICE Futures Europe exchange. Prices slid 48c, to $49.47 on Monday. The global benchmark crude traded at a premium of $1.92 to WTI, near the narrowest level since February.
US inventories probably dropped by 3.5 million barrels last week, a ninth straight decline, according to a Bloomberg survey before the release of data from the Energy Information Administration.
Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest US oil-storage hub, decreased by 750 000 barrels last week, according to a forecast compiled by Bloomberg.
American production has expanded to 9.34 million barrels a day, according to the Energy Information Administration, which will release its weekly report on Wednesday.
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