Oil prices fell slightly at the weekend, remaining near the previous day’s highs, on the prospect of talks by exporters about ways to prop up a market grappling with a supply overhang.
Brent crude futures were down 19 cents a barrel higher at $45.84 per barrel by 1000 GMT (0600 ET), from a three-week high of $46.66 earlier in the day.
United States West Texas Intermediate (WTI) crude stood at $43.41 a barrel, down by 8 cents after touching its highest level since July 25, at $44.17 per barrel.
Both price benchmarks rose more than 4 per cent last Thursday after Saudi Arabia’s energy minister Khalid al-Falih said oil producers would discuss potential action to stabilise oil prices during a meeting next month in Algeria.
“Yesterday (Thursday) was a big move in reaction to the Saudi oil minister’s comments. Now today (Friday) there is a reassessment, but the comments are probably not enough to trigger a sustained rally,” Olivier Jakob of consultancy Petromatrix in Zug, Switzerland said.
An outlook published by the International Energy Agency (IEA) that said it expected the supply and demand balance to tighten towards year-end also supported prices.
Traders said a drop of 8.1 per cent in China’s oil output in July, to a five-year low of 16.72 million tonnes, also lifted prices because it would mean Asia’s biggest economy has to import more crude.
Despite the output fall in China, the world’s biggest energy consumer, the market impact is mixed as its refined product exports are increasing.
“To be bullish, there would also need to be a drop in refining output,” Jakob of Petromatrix said.
Oil prices are still more than 12 per cent below their last peak in June, as brimming storage tanks and production that exceeds consumption weighs on markets.
Iran slashed its September official selling price for light crude to Asia by $1.30 a barrel, the latest sign that exporters are willing to accept discounts in return for market share.
AB Bernstein said global oil production rose almost 0.8 million barrels per day (bpd) in July from the previous month, to 97.01 million bpd, while commercial inventories increased by 5.7 million barrels to 3.09 billion barrels in June.
Despite cheap crude feedstocks prices, analysts said refinery margins, known as cracks, were poor as refiners continued to make more fuel than the market can absorb.
For July, Bernstein put Brent cracking margins at $3.02 per barrel (down $1.83 from June); U.S. Gulf Coast cracking margins at $5.06 a barrel (down $0.03).