Oil falls 2 percent on rising supply, concern about trade tensions

Ann Santiago
August 6, 2018

Futures fell for the third day in NY, losing as much as 1.1 per cent to hit their lowest level since June 22, but USA government's data showed a surprise gain in nationwide stockpiles on Wednesday.

Brent for October settlement dipped $1.82 to end the session at $72.39 on the London-based ICE Futures Europe exchange.

US stockpiles have been in the spotlight because they rose unexpectedly last week, stoking fears that the market is becoming oversupplied.

In the previous week ending July 20, EIA reported a draw of 6.1 million barrels.

The West Texas Intermediate (WTI) for September delivery lost 0.47 USA dollar to settle at 68.49 dollars a barrel on the New York Mercantile Exchange, while Brent crude for October delivery erased 0.24 dollar to close at 73.21 dollars a barrel on the London ICE Futures Exchange.

"Oil has been rebounding every time prices fall to near $68 since mid-July", Makiko Tsugata, a senior analyst at Mizuho Securities Co., said by phone.

"Oil is holding up reasonably well".

Russian oil output rose by 150,000 barrels per day in July from a month earlier, surpassing the amount Moscow had said ti would add following a meeting of global oil producers in Vienna in June, energy ministry data showed on Thursday.


"At the moment, there is a mismatch in timing, where there is increasing OPEC supply and yet we're not seeing a significant reduction in Iranian supply", Patterson said.

EIA's latest Short-Term Energy Outlook (STEO) from July forecasts that USA crude oil production will average 10.8 million bpd this year, up from 9.4 million bpd in 2017.

US officials told Reuters on Wednesday that they believe Iran is preparing to carry out a major exercise in the Gulf, apparently moving up the timing due to heightened tensions.

The price jump earlier this summer had come about in large part because of President Donald Trump 's decision to pull the USA out of an global agreement to curb Iran's nuclear program.

Oil last month posted the worst loss in two years on concern a trade war between the United States and China could curb economic growth and limit energy demand.

"A clear definition around the macros is what the market is looking for and until we get that, it is likely to be volatile in the range", said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.

Trump has turned up pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion of Chinese imports and China has said it will retaliate. On Tuesday, crude oil futures for September ended down $1.37 or nearly 2%, at $68.76 a barrel. Analysts polled by Reuters had expected a decline of 2.8 million barrels.

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