Oil price volatility will continue next week as supply and demand themes continue to play out in the market.
Saudi Arabia's OPEC Governor Adeeb Al-Aama said in a statement that the Kingdom expects crude exports to fall by roughly 100,000 barrels a day in August and there will be a substantial stockpile decline due to robust demand in the second half of this year.
OPEC agreed with Russian Federation and other oil-producing allies last month to raise output from July, with Saudi Arabia pledging a "measurable" supply boost but giving no specific numbers.
Oil prices dropped on Thursday after official data showed an unexpected rise in U.S. crude stockpiles and as United States output scaled record levels. By 2040, the volume of supply breaking even at above $70 a barrel could be as much as 11 million bpd, WoodMac says.More news: Andrew Lincoln breaks hearts as he confirms 'Walking Dead' exit
"Saudi Arabia and Russian Federation talking about supplying the markets, that would certainly have the potential to weigh on market sentiments", Lipow said.
There was some support for prices based on comments from Saudi Arabia, the world's biggest oil exporter, that it would cut crude shipments.
The rapid slide is surprising as it comes amid disruptions in Canada and Libya, growing unrest in Iraq's oil-producing heartland of southern Basra and the threat to Iranian exports from looming U.S. sanctions. "For the energy renaissance to continue, the U.S. natural gas and oil industry critically needs policies that advance energy infrastructure around the country as well as the access of USA energy to global markets". The objective is to bring down oil prices-and gasoline prices-ahead of the mid-term elections in November, the same month in which the renewed USA sanctions on Iran are returning.
Under the 2015 deal struck between Iran and six major powers - Britain, China, France, Germany, Russia and the United States - Tehran agreed to curb its nuclear activities in exchange for the lifting of crippling economic sanctions. For decades, the WTI contract based in Cushing, has been the benchmark for US oil prices, but Houston has surpassed Cushing in terms of importance. Last week the National Oil Corp. moved to lift force majeure on several export terminals, and said that it would begin restoring the disrupted supply. Gasoline inventories have swelled amid high runs and tepid demand growth, which will hurt the margin for further processing of gasoline.
Oil prices dropped on Wednesday after an industry group reported that USA crude inventories rose last week, defying analyst expectations for a significant reduction.