Oil prices fall sharply on Saudi pledge to cover production shortages
NEW YORK - Oil prices fell sharply Tuesday after Saudi Arabia reiterated that it would ensure enough supply to help cool prices amid concerns about the impact of sanctions on Iran.
New York's main futures contract, West Texas Intermediate crude for April, slid $2.48 to close at $105.61 a barrel.
In London trade, Brent North Sea crude for delivery in May settled at $124.12 a barrel, down $1.59 from Monday's closing level.
The New York market was "under pressure from speculation Saudi Arabia will boost output after the Saudi Cabinet yesterday said that the kingdom would work 'individually' and with other nations for the 'return of oil prices to fair levels,'" said Addison Armstrong at Tradition Energy.
Saudi Arabia recently has repeated assurances that it would make up for a supply shortfall to compensate for lost Iranian output as Western sanctions over Tehran's suspected nuclear weapons program take effect.
The assurances from Saudi Arabia come as the international community ramps up sanctions on Iran -- the world's fourth-largest oil producer -- in an effort to halt its nuclear activities, which Iran insists is for peaceful purposes only.
The United States said Tuesday it was exempting 11 nations including European Union members and Japan from tough new sanctions on Iran, praising them for reducing dependency on Tehran's oil.
Secretary of State Hillary Clinton said that the United States would exempt financial institutions from 11 nations -- Belgium, Britain, the Czech Republic, France, Germany, Greece, Italy, Japan, the Netherlands, Poland and Spain.
The International Monetary Fund on Tuesday warned that an abrupt, large spike in oil prices could hammer global growth.
IMF managing director Christine Lagarde estimated that crude oil prices may spike by up to 30 percent if Iranian supplies were disrupted, causing "serious consequences" for the global economy.
China, meanwhile, announced the biggest price increases on gasoline and diesel in nearly three years to curb demand.
China is the second biggest consumer of oil, after the United States.