NEW YORK (Reuters) – Oil prices dropped more than 1 percent on Tuesday on signs of rising supply and concern that global economic growth and demand for fuel will fall victim to the U.S.-China trade war.
FILE PHOTO – An employee holds a gas pump to refill a car at a petrol station in central Seoul April 6, 2011. REUTERS/Lee Jae-Won
Brent crude LCOc1 futures fell $1.43 to settle at $75.91 a barrel, a 1.85 percent decline. U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 86 cents to settle at $66.18 a barrel, a 1.28 percent drop.
Earlier in the session, Brent reached a session low of $75.09 a barrel, the lowest since Aug. 24. WTI slumped to $65.33 a barrel, the weakest since Aug. 17.
Both contracts have fallen about $10 a barrel from four-year highs reached in the first week of October.
Prices were pressured as U.S. inventories were expected to rise for a sixth straight week as other top producers Saudi Arabia and Russia signaled potential output increases.
Oil has been caught in the global financial market slump this month, with equities under pressure from the trade fight between the world’s two largest economies.
The United States has imposed tariffs on $250 billion worth of Chinese goods, and China has responded with retaliatory duties on $110 billion worth of U.S. goods.
U.S. President Donald Trump said on Monday he thinks there will be “a great deal” with China on trade but warned that he has billions of dollars worth of new tariffs ready to go if a deal is not possible.
Trump said he would like to make a deal now but that China was not ready. He did not elaborate.
“One discussion that is developing is that (trade tensions) are hurting demand for crude oil. There’s probably an element of truth to that,” said Bob Yawger, director of futures at Mizuho in New York.
The International Energy Agency (IEA) on Tuesday said high oil prices were hurting consumers and could dent fuel demand at a time of slowing global economic activity.
Oil production from Russia, the United States and Saudi Arabia reached 33 million barrels per day (bpd) for the first time in September, Refinitiv Eikon data showed. C-RU-OUT C-OUT-T-EIA PRODN-SA
That is an increase of 10 million bpd since the start of the decade and means the three producers alone now meet a third of global crude demand.
Investors awaited industry data on U.S. crude inventories, due to be released at 4:30 p.m. EDT on Tuesday. Stockpiles were expected to have risen about 4.1 million barrels in the week ended Oct. 26, an extended Reuters poll showed on Tuesday.
The United States is set to impose new sanctions on Iranian crude from next week, and exports from the Islamic Republic have already begun to fall. Saudi Arabia and Russia have said they will pump enough to meet demand once U.S. sanctions are imposed.
“The fact that this price weakness is developing just ahead of the official kickoff of the Iranian oil sanctions suggests an amply supplied market in which additional supply was brought to market well in advance of a likely acceleration in Iranian export decline,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Editing by David Goodman and Steve Orlofsky