NEW YORK – Saudi Arabia's assurances Tuesday that it would counter any disruptions of the global oil market pushed crude prices down Tuesday, but Libya's ongoing turmoil kept a floor on the market.
The world's largest oil supplier has 3.5 million barrels of day in spare capacity and is building up inventories in strategic locations, Oil Minister Ali Naimi said in a statement clearly aimed at calming markets.
"The Kingdom of Saudi Arabia has long been committed to promoting market stability in the interest of both producers and consumers, and in support of global economic growth and development," Naimi said.
"Time after time we have delivered on that commitment by tapping our additional crude oil production capacity when supply conditions warranted, and Saudi Arabia will continue to reliably meet the world's petroleum needs," he said.
Prices dropped quickly following the statement, but traders clearly remained cautious over the tentative political situation in many Arab countries, including in Saudi Arabia.
New York's main contract, West Texas Intermediate for delivery in April, shed 42 cents to settle at $105.02 a barrel, one day after soaring to $106.95 -- the highest level for 30 months.
In London, Brent North Sea crude for April delivery was down $1.98 to $113.06.
"Prices are rising and falling on the temperature of the Libyan situation," said John Kilduff of Again Capital.
But Tuesday's market was also driven by "all the chatter about OPEC putting more oil on the market," he said.
Members of the Organization of the Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, are holding talks over the oil market in light of the Libyan turmoil.
"We are in consultation but have not yet decided which direction" we are heading, Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah told reporters Tuesday.
Naimi meanwhile blamed "financial speculation and a negative and unrealistic take on supplies" for the price jumps of recent weeks, adding: "Current supplies in the market are very adequate."
But a new short-term forecast from the US Energy Information Administration also saw prices staying in their current range.
The EIA boosted Tuesday its forecast for the average 2011 price that refiners will pay for crude to $105 a barrel, $14 higher from its previous monthly forecast, citing the Middle East political challenge.
"My only concern is that tensions are still there for other Middle East countries and any further uprisings could see oil spike further," ETX Capital trader Manoj Ladwa told AFP.
Oil prices also weakened on Tuesday after the United States suggested it may tap its oil reserves to tackle high oil prices.
White House chief of staff William Daley said Sunday that the US had not ruled out tapping its strategic oil reserves to help dampen the higher cost of oil.