Seoul: Oil prices retreated below $71 a barrel as Saudi Arabia was said to offer extra crude to some customers, while the US reportedly considered tapping emergency supplies, to offset output losses around the world. Futures in New York slid as much as 1% after falling 3.8% last week.

Saudi Arabia offered additional cargoes of its Arab Extra Light crude to at least two buyers in Asia, people familiar with the matter said. Meanwhile the US, which is seeking to choke off crude exports from Iran, is said to be mulling releasing oil from its 660 million-barrel Strategic Petroleum Reserve (SPR).

Prices are retreating from the three-year high hit last month as Saudi Arabia and its allies move to counteract supply losses elsewhere in the Organization of Petroleum Exporting Countries (Opec), such as the spiraling crisis in Venezuela, erratic flows in Libya and renewed US sanctions on Iran. Oil prices are also slipping on concern that trade tensions between the US and China will hurt demand.

“There is no shortage of bullish news items on the supply side, but they are maybe being trumped by the talk of the president tapping the US SPR to keep oil prices down this summer, to alleviate the impact of U.S. sanctions on Iran’s oil exports," said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London.

West Texas Intermediate (WTI) crude for August delivery fell as much as 72 cents to $70.29 a barrel on the New York Mercantile Exchange, and was at $70.33 as of 10.43am London time. Total volume traded was about 28% below the 100-day average. Prices dropped $2.79 to $71.01 last week.

Brent for September settlement was down 40 cents at $74.93 a barrel on the London-based ICE Futures Europe Exchange, and traded at a $5.72 premium to WTI for the same month. Prices for the global benchmark crude declined 2.3% last week.

Futures for September delivery on the Shanghai International Energy Exchange gained 0.2% to 491.9 yuan a barrel, after falling 0.3% on Friday.

Libya disruption

In Libya, crude production at its biggest field is set to drop by about half after authorities shut wells for safety following the armed abduction of workers at the Sharara deposit, according to the National Oil Corp. While the African nation lifted force majeure at its western El-Feel field and resumed shipments from eastern oil ports last week, supply disruptions like the one at Sharara complicate efforts by OPEC, of which Libya is a member, to pump more crude.

Russia’s Energy Minister Alexander Novak said that OPEC and its partners could increase production by more than the 1 million barrels a day they agreed to last month if needed. Still, the group’s Gulf members may need to pump almost as much oil as they can to cover swelling output losses, according to the International Energy Agency.

“We may see OPEC members with the ability to ramp up output seek to grab more market share," while others such as Iran and Venezuela try to maintain the agreement, said Ahn Yea Ha, an analyst at Kiwoom Securities Co. “It’s unclear whether the U.S. will actually use the emergency inventories, but we can at least tell that they feel a lot of pressure from crude trading above $70."

The Trump administration is reviewing options ranging from a 5 million-barrel test sale to the release of 30 million barrels from its oil reserve to cool pump prices ahead of congressional elections in November and as sanctions on Iran are due to snap back. A senior Iranian official urged Trump not to use the emergency stockpiles and instead drop sanctions on Iran’s crude shipments.

The Islamic Republic, facing the loss of customers scared off by US penalties, disputes that OPEC agreed to any significant output increases at its meeting in June. Production limits assigned in late 2016 still apply, and any country that exceeds them is betraying the group, it has said.

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