NEW YORK (Reuters) – Oil prices fell on Monday as Russia signaled that production remains high, but losses were capped before US sanctions on Iranian exports, which are expected to cut their supplies in less than a week.
Oil and gas tanks are seen in an oil storage in a harbor in Zhuhai, China. October 22, 2018. REUTERS / Aly Song
Brent crude LCOc1 futures fell 12 cents to $ 77.50 a barrel at 11:48 pm EDT (1548 GMT). The West Texas Intermediate (WTI) CLci crude lost 30 cents to $ 67.29 a barrel.
Even with US sanctions for Iranian exports coming into effect on November 4, oil prices have fallen by about $ 10 a barrel since the start of the four-year highs in early October.
Russian Energy Minister Alexander Novak said on Saturday that Russia had no reason to freeze or reduce its oil production. There are risks that the global oil markets would face a deficit.
The Organization of Petroleum Exporting Countries (OPEC), led by Saudi Arabia and non-OPEC member Russia, agreed in June to increase oil supplies, but OPEC signaled last week that it may have to resume production cuts if it does global inventories are rising.
"If the Russians talk about keeping production high and even the possibility of having to increase it because of a possible shortage of supply has brought the selling pressure," said Gene McGillian, market research manager at Stamford, Connecticut.
Industrial commodities such as crude oil and copper were also shaken by sharp losses in global equities amid concerns about corporate earnings and fears about the impact of escalating trade tensions on economic growth and a stronger dollar.
Although stock markets rebounded on Monday, the S & P 500.SPX benchmark was well on its way to posting the worst monthly performance since May 2010.
The US Dollar Index .DXY also rose on Monday, helped by robust US consumer spending. [USD/] A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.
"It's often said that commodities get cold as stock markets sneeze, and this adage was shown in detail last week when a global decline in stock indicators dragged the energy complex down," said Stephen Brennock, strategist at PVM Oil Associates.
Fund managers have lowered their bullish positions in crude oil futures and options to their lowest level since July 2017 for four consecutive weeks, as demand expectations become more uncertain.
On the supply side, Iran has for the first time started selling crude oil to private companies through a domestic stock exchange, reported the news website of the Oil Ministry.
Only days before the sanctions on Iran come into force, three of Iran's top five clients – India, China, and Turkey – are resisting Washington's demand to end oil purchases, arguing that there are not enough supplies worldwide, to replace them, sources that are familiar with the matter.
This pressure, along with worries about a harmful oil price spike, increases the possibility of bilateral agreements that allow some purchases to continue, sources said.
Additional reporting by Amanda Cooper in London, Henning Gloystein in Singapore; Editing by Marguerita Choy and Mark Potter