Oil Falls Below $134 on Saudi Output Hike Plan
Oil prices slipped from record highs on plans by top exporter Saudi Arabia to increase crude output in order to help curb soaring fuel costs.
The move by the OPEC kingpin came as American and British regulators imposed position limits on U.S. crude contracts on the London-based ICE exchange amid concerns speculators are pushing prices above levels supported by supply and demand.
U.S. light, sweet crude fell 77 cents to close at $133.84 a barrel, after hitting a record $139.89 on Monday.
London Brent crude also traded lower.
United Nations chief Ban Ki-moon said over the weekend that Saudi Arabia was set to raise its oil output to 9.7 million barrels per day in July, up 550,000 bpd from May.
The plan comes ahead of a June 22 meeting between oil producing and consumer nations in Saudi Arabia as protests against high fuel costs spread across the globe.
"The Saudis seem quite willing to supply the market with more, despite their OPEC brethren's objections at a time when average gasoline prices around the country are moving beyond $4," Mike Fitzpatrick of MF Global said in a research note. "Under these conditions, oil looks less and less attractive."
Oil prices have jumped nearly seven-fold since 2002 as strong demand from emerging economies such as China stretches global production.
The increase in Saudi Arabian oil production, as well as the new regulatory scrutiny, could scare off some investors and bring down prices, according to analysts.
Before the Saudi plan, members of the Organization of Petroleum Exporting Countries had insisted that oil's record rise this year was driven by speculation.
U.S. Energy Secretary Sam Bodman has repeatedly said fundamentals were driving the market, and called upon OPEC to help consumer nations by raising production rates.
Billionaire oil tycoon T. Boone Pickens played down the role of investors in crude markets on Tuesday, arguing prices were rising as world oil production peaks.
"I do believe you have peaked out at 85 million barrels a day globally," Pickens, who heads BP Capital hedge fund, told the Senate Energy and Natural Resources Committee.
"Demand is about 86.4 million barrels a day, and when the demand is greater than the supply, the price has to go up until it kills demand."
The market will also look toward U.S. oil inventories data due on Wednesday, which is expected to show U.S. crude stocks down for the fifth week in a row as imports dipped, an expanded Reuters poll of analysts showed on Tuesday.
On average, analysts called for a drop of 1.5 million barrels for crude, and increases of 800,000 barrels for gasoline and 1.8 million barrels for distillates.