LONDON: Brent crude oil fell below $124 on Wednesday as Saudi efforts to lower prices by promising to ramp up supply offset the impact of fears about disruption of supply from Iran and of a surprise drawdown in US stocks.
Comments from the Saudi oil minister reassuring the market that the world's top oil exporter was prepared to meet any supply shortfall helped push prices lower for a second day.
Oil Minister Ali al-Naimi said on Tuesday the kingdom had met all its customers' requests for oil and stood ready to raise output to full capacity of 12.5 million barrels per day (bpd), if needed.
"The Saudi Arabian oil minister's comment should keep a cap on prices and start to push them down... and there is plenty of supply," said Michale Hewson, senior market analyst at CMC Markets.
Brent crude was 21 cents lower to $123.91 a barrel by 1300 GMT, after falling more than a dollar in the previous session on the Saudi comments.
US crude was up 13 cents at $106.20. The benchmark fell more than 2 percent on Tuesday.
But industry data released on Tuesday showed an unexpected 1.4-million-barrel decline in US crude stockpiles last week, supporting prices.
The prospect of a conflict in the Middle East between Iran and the West also continues to put a floor under the price, analysts said.
US President Barack Obama issued a video accusing Iran of imposing an "electronic curtain" on its citizens on Tuesday, while Iran's supreme leader Ayatollah Ali Khamenei said the country will defend itself against an attack.
"That was another round of sabre-rattling from both sides and there is still a fear that something bad will happen in the region, which explains some of why we are still at $124 a barrel," said Thorbjorn Bak Jensen, oil analyst at Global Risk Management.
SANCTIONS WATCHED
The US on Tuesday exempted Japan and 10 EU nations from financial sanctions because they have significantly cut purchases of Iranian crude oil, but left Iran's top customers China and India exposed to the possibility of such steps.
Oil has gained almost 16 percent this year, pushed up by fears of supply disruption stemming from a possible conflict between Iran and the West.
However, Iran has agreed to hold talks with the West about its nuclear programme, which it describes as peaceful, and analysts say this could put downward pressure on prices.
"The panic buying seems to have paused for now, which corresponds with what is happening with the geopolitical situation as the UN Council has re-open negotiations with Iran," said James Zhang, analyst at Standard Bank.
US crude stockpiles fell 1.4 million barrels in the week to March 16, data from the American Petroleum Institute showed, compared with analysts' expectations for a 2.4 million barrel build.
The market awaited inventory data from the US Energy Information Administration at 1430 GMT for confirmation of the drawdown.
China's crude inventory was also lower last month, with commercial stocks falling 3.77 percent by the end of February from a month earlier, official news agency Xinhua said on Wednesday.
China imported a record 1.39 million barrels per day of crude oil from Saudi Arabia in February, 38.6 percent higher than a year earlier, while slashing Iranian imports by around 40 percent, official data showed on Wednesday.
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