Oil extends slump as Saudi Arabia, Russia hint at supply hike

Russian Energy Minister Novak attends a session of the St. Petersburg International Economic Forum

U.S. West Texas Intermediate (WTI) crude CLc1 futures fell $1.15 to settle at $66.73 a barrel, a 1.7 percent loss.

"But at the same time there are some worries over a fall in USA oil demand if more Middle East crude supplies flow into the market", Hwang said.

USA oil got some support as US crude inventories likely fell by 1.8 million barrels last week, a preliminary Reuters poll showed on Tuesday.

In recent months, Saudi Aramco has been lifting its OSPs to Asia, with the price for its benchmark Arab Light grade being set for June cargoes at a premium of $1.90 a barrel to the Oman/Dubai average, the highest since August 2014.

While Russia and OPEC benefit from higher oil prices, up nearly 20 percent since the end of previous year, their voluntary output cuts have opened the door to other producers, such as the USA shale sector, to ramp up production and gain market share. Thus it is in the direct interest of the Saudis to maintain oil at a high price.

Looking back at history, in 2016, an oversupplied market resulted in oil prices falling to their lowest in more than a decade of below $30 a barrel.

Oil traders believe the price may have already hit its ceiling, one analyst says. US stock markets sank more than 1 percent, while the dollar gained about 0.7 percent.

The Department of Energy (DOE) bared on Tuesday the Philippines' "two-pronged strategy" to source petroleum products from Russian Federation and other non-OPEC countries "to establish a strategic petroleum reserve (SPR) to cushion the impact of the rising price of oil in the worldwide market". Probably not, although India is among Saudi Arabia's largest clients, and its demand for oil is growing at the fastest pace in the world.

Despite worries over Iranian and Venezuelan oil, there are many solutions for the global supply system to fill the gap and prevent any supply constraints. So far, the cartel has gone where Saudi Arabia has wanted it to go, some more willingly than others, but still together, as higher prices are generally good for oil-dependent economies.

Energy Secretary Alfonso Cusi, who acts as PNOC-EC's ex-officio chairman, has tasked the state firm to prepare for oil trading and retail to provide competition to existing oil industry players and curb increasing prices of petroleum products.

Despite efforts being made to contain the price hikes, the price of oil is however expected to rise any time soon into the future, as the lack of world investment in the oil sector will not allow any major companies to produce more than the current level, which is around 100 million barrels per day. USA crude CLc1 was up 40 cents at $67.13.

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