LONDON, Aug 11: World oil prices gave up initial gains to slide in volatile trading on Wednesday after oil kingpin Saudi Arabia said it was ready to "immediately" increase oil output by 1.3 million barrels per day.
Brent North Sea crude oil for September fell 31 cents to $40.97 per barrel in late trading in London. New York's light, sweet crude for September delivery slid 82 cents to $43.70 in early deals, a day after surging to the record high level of $45.04.
Prices began plunging after Saudi Oil Minister Ali al-Nuaimi said the Gulf state was ready to hike production to cope with hot world demand. "The kingdom is well prepared to meet all the requirements of the international oil companies if they need additional volumes, relying on its surplus production capacity of more than 1.3 million barrels daily, which could be used immediately if required," Nuaimi told the state news agency SPA.
"Saudi Arabia, in collaboration with the other Opec members, endeavours to ensure the stability of the international oil market and prevent oil prices from escalating in a way that may negatively affect the world economy or oil demand," Nuaimi said.
He added that Saudi Arabia's average production rose to more than 9.3 million barrels per day during the past three months. "The Saudi comments have helped the market fall back," Prudential Bache trader Tony Machacek said.
"On the face of it you have to believe what they say." Nuaimi's comments came shortly after the US government announced that US commercial crude oil and gasoline inventories drained lower in the week to August 6.
US crude oil inventories fell by 4.3 million barrels to 294.3 million last week, the Energy Department said. Stocks of gasoline, or petrol, dropped 1.8 million barrels to 208.3 million but distillates - mostly diesel and heating oil - gained 1.3 million barrels to 122.5 million.
"If you look more broadly at the stocks data, the year-on-year situation is not too bad, and it may be another reason why prices are falling back," Machacek said. World oil prices had earlier risen, as the market chased fresh record high levels and shrugged off a warning by the International Energy Agency (IEA) that the market is showing "irrational exuberance".
"The market is tight, production and infrastructure capacity is less than desired and uncertainties continue to weigh on the market," the IEA said in its monthly review of global energy markets. "But, does this justify 45 dollar oil? Current oil prices are a concern and are causing economic damage," it added. -AFP