Oil pumps. Picture: 123RF/PIXNOO
Oil pumps. Picture: 123RF/PIXNOO

London — Oil fell below $64 a barrel on Monday, reversing an earlier gain, pressured by the prospect of a faster-than-expected full restart of Saudi Arabian oil output and by fresh signs of European economic weakness.

A source, briefed on the latest developments in the September 14 attack on Saudi oil facilities, said Saudi Arabia has restored about 75% of crude output lost.

Oil was up earlier in the session, supported by scepticism over how fast output would come back.

Global benchmark Brent crude fell 30c to $63.98 a barrel at 10.45am GMT, having earlier risen as high as $65.50. US West Texas Intermediate (WTI) was down 38c to $57.71.

A business survey showing eurozone business growth stalled in September, dragged down by shrinking activity in Germany where a manufacturing recession deepened unexpectedly, also weighed on oil and other markets such as equities.

“Oil prices are tracking European markets lower this morning, understandably knocked by the woeful manufacturing data from the bloc and the implications for global growth and demand,” said Craig Erlam, analyst at Oanda.

Brent has still gained about 18% this year, helped by a supply-limiting pact led by Opec, though concern about slowing economic growth has limited the advance.

Tension in the Middle East has escalated since the Saudi attack. The Pentagon has ordered additional US troops to be deployed in the Gulf region to strengthen Saudi Arabia’s air and missile defences.

Britain believes Iran was responsible for the attack and will work with the US and European allies on a joint response, UK Prime Minister Boris Johnson said on Monday. The US and Saudi Arabia have already blamed Iran, which denies responsibility.

The Saudi attacks have refocused investor attention on the prospect of other supply disruptions in other Opec producers like Nigeria, Libya and Venezuela. Investors had been less concerned about supply risks due to ample supply.

“The geopolitical risk premium has returned with a vengeance and supply-side developments have been thrust back into the spotlight,” Stephen Brennock of oil broker PVM said.

“While Saudi oil facilities smoulder, the potential for fresh outages in Nigeria, Libya and Venezuela continues to hang over the market.”

Reuters