LONDON (Reuters) – Oil prices fell on Tuesday. This is due to fears that the US-China trade dispute will slow economic growth and that, despite the impending sanctions on Iran, there is an increase in global supply.
FILE PHOTO – An employee holds a gas pump to fill a car at a gas station in central Seoul. April 6, 2011. REUTERS / Lee Jae-Won
The benchmark Brent crude LCOc1 fell 70 cents a barrel at $ 76.64 at 1035 GMT. U.S. light raw CLc1 had dropped 50 cents to $ 66.54.
Both contracts recovered in the last week, but are down $ 10 a barrel below the four-year highs in the first week of October.
Oil was hit by the slump in the global financial market this month. Equities were under pressure from the trade war between the two largest economies in the world.
Financial markets on Tuesday found support in reports that US President Donald Trump "made a great deal" with China in the trade.
But for now, the dispute between Washington and Beijing continues and seems to be slowing global economic growth and demand for fuel.
The International Energy Agency (IEA) said Tuesday that high oil prices could weigh on consumers and dampen fuel demand in times of slowing global activity.
"There is two downward pressures on the growth of global oil demand, one of which is high oil prices, and in many countries they are directly related to consumer prices, the second factor being the slowdown in global economic growth," said IEA chief Fatih Birol an energy conference in Singapore.
Advisor JBC Energy said oil price weakness was "likely driven by generally negative market sentiment due to speculation about additional US tariffs on Chinese imports should future talks fail to produce desired results."
Oil is also under pressure from rising output from the world's largest producers – Russia, the US and Saudi Arabia – which, after more than a year of inventory, are helping to replenish global oil supplies.
The oil production of these three producers reached for the first time in September 33 million barrels per day (bpd), as data from Refinitiv Eikon showed. C-RU-OUT C-OUT-T-EIA PRODN-SA
That's an increase of 10 million barrels per day since the beginning of the decade, meaning that these three producers now cover a third of global crude oil demand alone.
The US will impose new sanctions on Iranian crude next week, and exports of the Islamic Republic are already beginning to decline.
But there does not seem to be any significant crude oil shortage. Saudi Arabia and Russia have said they will pump enough to meet demand once the US sanctions.
Iran's crude oil exports fell from a peak in May 2018 of just over 2.5 million barrels in May to around 1.5 million barrels a day in September and October.
Reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Cut by Dale Hudson and Edmund Blair