Oil prices drop as Saudis keep pumps running

Oil prices fell on Tuesday as a global supply glut and soft demand overshadowed the impact of geopolitical tensions in the crude-rich Middle East, analysts said.

US benchmark West Texas Intermediate (WTI) for delivery in June slid 43 cents to $59 a barrel.

Brent North Sea crude for July shed 63 cents to stand at $65.64 a barrel in London afternoon deals.

“According to official data… Saudi Arabia exported just shy of eight million barrels of crude oil per day in March — the highest export volume in more than nine years,” said analysts at Commerzbank in a note to clients on Tuesday.

Bernard Aw, market strategist at IG Markets Singapore, said “global oversupply with weak demand” continues to put a cap on prices despite geopolitical unrest raising concerns about a disruption in the Middle East.

He said the crude market is already “used to” unrest in the region, where Islamic State fighters on Sunday captured the key Iraqi city of Ramadi.

Yemen is also engulfed in violence that analysts fear could escalate and draw in neighbouring Saudi Arabia and Iran, which are backing the warring factions.

Yemen is not a major oil-producing country, but its coast forms one side of the Bab el-Mandeb Strait, the key strategic entry point into the Red Sea through which some 4.7 million barrels of oil pass each day on ships headed to or from the Suez Canal.

“Fears that the fighting in Iraq and Yemen could hamper the oil supply have clearly given way to a more sober appraisal, for the past twelve months have demonstrated that such concerns are exaggerated,” Commerzbank analysts added.

“In actual fact, the oil supply from the region has continued to grow.”

Oil supplies from leading OPEC producers Saudi Arabia, Kuwait and the United Arab Emirates are already near their highest levels in three decades, the International Energy Agency (IEA) said last week.

Crude futures have fought back a little in recent weeks after prices plummeted more than 60 percent between June and January, as the Organization of the Petroleum Exporting Countries refused to cut production despite a global glut.

The move by the 12-nation OPEC cartel, which pumps about 30 percent of global crude, was widely taken as an attempt to push US shale producers, which have higher costs, out of the market.