Oil drops amid concern about excess supply

Tokyo — Oil prices extended declines into a second session on Tuesday as attention shifted to the risk of oversupply, with market participants shrugging off the escalating tension between the US and Iran.

Brent crude oil was down 19c, or 0.3%, at $72.87 a barrel by 3.45am GMT, after settling down 1c on Monday. US crude was down 21c, or 0.3%, at $67.68 a barrel. The contract fell 37c the previous day.

Earlier in Monday’s session, the market had risen after President Donald Trump warned of dire consequences for Iran if it threatened the United States.

“While oil prices were the primary beneficiary of the weekend’s headline battle between President [Donald] Trump and Iranian President Rouhani, that boost started to fizzle as traders then veered to oversupply concerns,” said Stephen Innes, head of trading for Asia-Pacific at brokerage Oanda.

Iran has been under increasing pressure from the US, with Trump’s administration pushing countries to cut all imports of Iranian oil from November.

Saudi Arabia and large producers are ramping up output to offset losses that are likely to come as the November deadline approaches.

Meanwhile, US crude inventories at the delivery hub at Cushing, Oklahoma, gained in the four days to Friday, according to information supplier Genscape, traders said.

On a weekly basis, stockpiles at the hub were expected to fall for the 10th consecutive week, traders said.

The market has also been dented by concerns about the effect on global economic growth and energy demand of escalating disputes over global trade.

Group of 20 (G-20) finance leaders at the weekend voiced concern about the risk to global growth from trade tension between the US and China, among others.

“The lingering trade war effects continue to raise global growth concerns that continue to dampen sentiment,” Innes said.

Reuters

Source: businesslive.co.za