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NEWS
Oil futures slumped Monday, undercut by uncertainty following the replacement of longtime Saudi Arabian oil minister Ali al-Naimi over the weekend and indications wildfires may not have the impact previously feared on Canadian crude output.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in June fell $1.22, or 2.7%, to settle at $43.55 a barrel. July Brent crude on London’s ICE Futures exchange declined $1.74, or 3.8%, to end at $43.63 a barrel. Oil had rallied in Asian and European hours. The June Nymex contract neared $46 a barrel and Brent hit an intraday high of $46.48. “The sacking of Saudi’s Ali al-Naimi as head of the country’s oil ministry may be a reason why oil prices have failed to maintain their early advance,” said Fawad Razaqzada, technical analyst at Forex.com and City Index, in a note. “Al-Naimi’s successor, Khalid al-Falih, the former head of the state-owned Aramco, is largely expected to follow the strategy of protecting the nation’s market share. This has further reduced the likelihood of an oil-freeze deal with other large non-OPEC producers,” he said.

The continuing wildfire near the hub of Canada’s oil sands also provided an early lift for crude. But news reports said the fire was spreading more slowly, tempering worries. At least 645,000 barrels a day of oil-sands output, or more than a quarter of Canada’s total 2.5 million barrels a day in oil-sands production, have been sidelined, based on public announcements. But the true figure may be close to one million barrels a day of production because two of the largest operators haven’t specified the extent of their production losses due to the fire fallout.

Earlier crude got a lift from trade data out of China. China’s crude imports rose 7.6% year-over-year last month, marking the third straight month that crude imports surpassed 30 million tons. On a daily basis, China shipped in 7.9 million barrels a day in April. In the first four months of the year, China imported 123.67 million tons of crude, equivalent to a 12% year-over-year rise. The strong flow of foreign crude is heavily supported by the rising number of local refineries, known as teapots, that have been allowed to import crude directly from a foreign source since less than a year ago. “This is giving the market hope that China’s appetite for crude will remain elevated at a time when the world is flooded with oil,” said Ben Le Brun, an energy analyst at Sydney-based optionsXpress.

The Saudi oil ministry reshuffle came at a time when many oil producers are struggling with the persistently low prices due to overproduction. An attempt to curb global output was foiled last month when Saudi Arabia at the last minute refused to take part in a collective freeze after Iran wouldn’t change its mind on ramping up production until it reaches the pre-sanction level of around 4 million barrels a day. “Iran has always been a big competitor for Saudi, even during sanctions as Iran was still exporting over one million barrels a day to Asian countries. They were also discounting their crude back then,” said Amrita Sen, chief oil analyst at Energy Aspects. Morgan Stanley said in a note that Iran’s success in ramping up post-sanctions production may remove some of its reluctance to join a price freeze. Oil output from the Islamic Republic could soon hit 4.2 million barrels a day which would represent a rise of 800,000 barrels a day since November, the bank said.