Oil loses ground as rising Opec and US output puts markets under pressure

Singapore — Oil prices fell on Monday amid rising supply from Opec and the US, outweighing the concern that falling Iranian output will tighten markets once US sanctions bite from November.

International Brent crude oil futures were at $77.43 a barrel at 2.22am GMT, down 21c, or 0.3%, from their last close.

US West Texas Intermediate (WTI) crude futures were at $69.62 a barrel, down 18c, or 0.3%, from their last settlement.

Output from the producer cartel Opec rose by 220,000 barrels a day between July and August, to a 2018-high of 32.79-million barrels a day, a Reuters survey found.

Output was boosted by a recovery in Libyan production and as Iraq’s southern exports hit a record.

Meanwhile, US drillers added oil rigs for the first time in three weeks, energy services firm Baker Hughes reported on Friday, increasing the rig count by two units to 862.

The high rig count has helped lift US crude oil production by more than 30% since mid-2016, to 11-million barrels a day.

Despite the price dip, Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda said Brent was “supported by the notion that US sanctions on Iranian crude oil exports will eventually lead to constricted markets”, which he said was likely to push up prices.

“Iranian production is already showing signs of decline, falling by 150,000bbl/day last month … [as] importers of Iranian barrels will already be moving away from taking shipments,” said Edward Bell, commodity analyst at Emirates NBD bank in Dubai.

Many analysts have warned that an economic slowdown because of trade disputes between the US and other major economies including China and the EU would drag on oil demand.

Amid rising trade tariffs raised by Washington and Beijing, China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday.

Despite this, Oanda’s Innes said it was too early to say whether an economic slowdown would put a serious dent on oil prices.

“While the analysts continue fretting that $200bn in tariffs could drag down oil demand, it isn’t at all clear that such type of economic headwinds will topple oil prices given … the constant barrage of supply outages,” he said.

Reuters