Oil extends losses, falling towards $75

London — Oil fell towards $75 a barrel, its lowest since late August, on Wednesday, pressured by concern that demand is weakening and supply ample even as US sanctions loom on oil exporter Iran.

In a sign that supply is plentiful, industry group the American Petroleum Institute (API) said on Tuesday that US crude stocks had risen by 9.9-million barrels — more than forecast. The US government’s supply report is due at 2.30pm GMT.

Brent crude, the global benchmark, was down $1.28 to $75.16 a barrel at 8.55am GMT. It fell earlier to $75.11, the lowest since August 24. US crude dropped 30c to $66.13.

“Demand worries have been around for a while,” said analyst Olivier Jakob of PetroMatrix, adding that as long as refining margins for petrol and inter-month spreads for crude remained weak, “it’s going to be difficult to rebound”.

Crude fell sharply in the previous session, with Brent closing down 4.3%.

“This price movement comes as little surprise with attention now clearly being focused on the weakening economic situation and gloomy demand outlook,” said analysts at JBC in a report.

A sell-off in equities due to concern about the economic outlook also weighed on crude on Tuesday. Forecasters, such as the International Energy Agency (IEA) already expect slower oil-demand growth for 2019 due to a slowing economy.

On Wednesday, Asian stocks edged up as signs of stimulus from China propped up sentiment and European shares attempted a tentative rebound.

While US sanctions on Iran, which start on November 4, are expected to tighten supplies, other producers, notably top exporter Saudi Arabia, are already pumping more oil and willing to increase this further if needed.

Saudi energy minister Khalid al-Falih said on Tuesday that Saudi Arabia would step up to “meet any demand that materialises to ensure customers are satisfied”.

Some analysts say, nonetheless, that prices could rebound. According to US bank Morgan Stanley, “We still see Brent reaching $85 abarrel by year-end.” 

Reuters