Oil futures fell Friday, extending a decline after Saudi Arabia declared a partial cease-fire in its conflict with Yemen, potentially easing geopolitical worries in the region.
West Texas Intermediate crude for November delivery CLX19, -1.10% fell 58 cents, or 1%, to $55.83 a barrel, while November Brent crude BRNX19, -1.32%, the global benchmark, fell 73 cents, or 1.2%, to $61.01 a barrel.
The Wall Street Journal reported that Saudi Arabia had moved to impose a partial cease-fire in war-torn Yemen as Riyadh and Houthi militants try to bring an end to a four-year war that’s become a flashpoint in a regional confrontation with Iran.
Houthi leaders had initially claimed responsibility for a Sept. 14 attack on production facilities that knocked around 5 million barrels a day of Saudi crude production offline, temporarily sending oil soaring earlier this month. But Saudi, U.S. and European officials have blamed Iran for the attacks, charging that the Houthi claims were an effort to obscure the country’s role in the attacks, the Journal noted.
Crude oil was buoyed Thursday after the U.S. Defense Department announced the deployment of U.S. military personnel and equipment to Saudi Arabia, arresting a pullback in crude fueled in part by news reports, citing Saudi officials, that the country had restored production capacity to more than 11 million barrels a day.
Analysts remained skeptical of the figure, but said it was possible that capacity was returning more quickly than had been anticipated. Still, oil market bulls said the end of the post-attack rally overlooked the damage to global spare capacity caused by the attack. After all, said Jason Gammel, equity analyst at investment bank Jefferies, a large part of any rebound in Saudi capacity would be due to redundant capacity at the country’s damaged Abqaiq plant, which itself represents the bulk of the country’s spare capacity.
As a result of the attack, Gammel estimates that global spare capacity is now well below 1 million barrels a day.
“The market appears to be more focused on what will likely be oversupply in 2020, but the complacency now means that any other incidents will have more severe price repercussions,” he said, in a note.
November natural-gas futures NGX19, -0.94% declined 0.9% to $2.421 per million British thermal units.