Brent on track for biggest monthly loss in two years

London — Sliding Brent crude futures were on track for their biggest monthly loss in two years on Tuesday after a Reuters survey showed oil cartel Opec’s oil output hit a 2018 high in July, re-igniting concern about supply overtaking demand.

October Brent crude futures were down 35c at $75.20 a barrel by 9.11am GMT. The September contract expires later on Tuesday. US crude futures fell 42c to $69.71 a barrel, after having risen more than 2% the day before.

Brent has fallen by about 6% in July in its largest one-month slide since July 2016. US futures have fallen by slightly less than this, but are still on track for their biggest monthly decline since last October.

A Reuters survey on Monday showed Opec increased production in July by 70,000 barrels per day (bpd) to 32.64-million bpd, a high for the year. Russian energy minister Alexander Novak said last week that Russia’s output will hit a new 30-year high of 11.02-million bpd in 2018.

Opec has pledged to offset the loss of Iranian supply as upcoming US sanctions have already started to cut exports from OPEC’s third-largest producer.

“On the supply side, the latest news from Russia shows they increased production by about 300,000 bpd … as well as an increase in production in the Opec survey,” Saxo Bank senior manager Ole Hansen said. “The global balance [between supply and demand] has softened and has been less tight in July, hence the sell-off we’ve seen.”

US President Donald Trump appeared to soften his approach to Iran, saying on Monday that he would be willing to meet with President Hassan Rouhani without any pre-conditions. Just a week ago Trump threatened on Twitter to unleash severe consequences on Iran. The US has indicated that it wants Iranian exports to hit zero under the sanctions it pledged to re-introduce in May. These go into full effect in November.

Weekly US inventory data is scheduled for release beginning on Tuesday with the American Petroleum Institute (API), an industry group, followed by the US Department of Energy’s Energy Information Administration (EIA) on Wednesday.

Six analysts polled ahead of these reports estimated, on average, that crude stocks fell by about 3.2-million barrels in the week ended July 27. The API is scheduled to release its data for last week at 8.30pm GMT on Tuesday and the EIA report is due late on Wednesday.

Reuters