Rising supplies, slowing Asian growth hit oil prices

London — Oil prices fell on Monday as supplies from Saudi Arabia and Russia rose, while economic growth stumbled in Asia amid an escalating trade dispute with the US.

Benchmark Brent crude oil fell $1.24 a barrel to a low of $77.99 before recovering to about $78.50, down 73c, by 9.35am GMT. US light crude was down 40c at $73.75.

Oil prices rose strongly last week, with the US crude contract hitting its highest in three-and-a-half years at $74.46.

But a flurry of US announcements at the weekend unsettled oil markets.

US President Donald Trump tweeted on Saturday that Saudi Arabia’s King Salman bin Abdulaziz Al Saud had agreed to pump more oil, “maybe up to 2,000,000 barrels”. The White House later walked back on the comments.

Saudi Arabia’s output is up by 700,000 barrels a day from May, a Reuters survey showed, and close to the record of 10.72-million barrels a day it pumped in November 2016.

Russian output rose to 11.06-million barrels a day in June from 10.97-million barrels a day in May, the Energy Ministry said on Monday.

US production has soared 30% in the past two years, to 10.9-million barrels a day, meaning the world’s three biggest oil producers now churn out almost 11-million barrels a day each, meeting a third of global oil demand.

Also weighing on oil demand are trade disputes between the US and other major economies including China, the European Union, India and Canada.

Asia’s main economic hubs of China, Japan and South Korea reported a slowdown in export orders in June amid escalating trade disputes with the US.

“Recurring salvos in the trade war and falling asset prices raise the question of how much tariffs could damage the global economy,” US bank JPMorgan said.

The bank said a “medium-intensity (trade) conflict would likely reduce global economic growth by at least 0.5%, “before accounting for tighter financial conditions and sentiment shocks”.

Despite the relief from Saudi Arabia and Russia, oil markets remain tense because of unplanned outages from Canada, Venezuela and Libya.

Looming US sanctions against Iran further contribute to expected tightness.

Trump threatened in an interview that aired on Sunday to put sanctions on European companies that do business with Iran.

“The Trump administration’s plan for Iran sanctions is now abundantly clear. They seek to push Iranian exports of crude, condensate, and oil products to zero,” energy consultancy FGE said in a note.

Reuters