Oil drops on Saudi supply promise
Oil fell after Saudi Arabia promised to keep markets well-stocked with petroleum. Concerns about economic growth and fuel demand in China also weighed on prices.
Oil has risen more than nine per cent this year as a stand-off over Iran's nuclear programme has threatened to disrupt oil supplies from the Middle East. High prices for oil and gasolene can dampen global economic growth.
The Saudi government said Tuesday that it aims "to provide adequate supplies of petroleum, stabilise oil markets and return oil prices to fair levels for producers, consumers" and the oil industry. Saudi Arabia produces about 10 million barrels a day and said it has the ability to quickly raise that to 12.5 million barrels a day.
Iran exports more than two million barrels of oil a day. It has threatened to stop oil shipments through the strategically important Strait of Hormuz. A fifth of world's oil supplies pass through the strait at the edge of the Gulf.
The ruler of Kuwait was quoted Tuesday by the state news agency as saying that Iran has assured its neighbours that it won't block the vital waterway. He also said his country is increasing production.
The Saudis and Kuwaitis are trying to send a message that the market shouldn't be so concerned about Iran, independent analyst Jim Ritterbusch said. "If they can bring more barrels to refineries, then it could help oil prices" cool off.
Western leaders are concerned that Iran is and have been trying to put financial pressure on the country to open its facilities to inspection. Iran denies the claim, though it turned inspectors away in February.
Benchmark US crude fell $1.95 to $106.14 per barrel in New York while Brent crude lost $1.31 to $124.40 in London.
Concern about a slowdown in China's economy also pressured oil prices. Mining giant BHP Billiton forecast weakening Chinese demand for iron ore used in steelmaking. Also, China raised the price of retail gasolene for the second time in two months, which could hurt demand for fuel.
Meanwhile, retail gasolene prices in the US are now averaging $3.846 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular is the highest ever for this time of year. The national average has risen by 57 cents per gallon since January.