LONDON (Reuters) – The oil price fell more than 2 percent on Tuesday, indicating signs of rising supply and fears that global economic activity and fuel demand would be impacted by a worsening US-China trade dispute.
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 $ 2.25 / barrel to a low of $ 75.09, before rebounding slightly to $ 75.50, or $ 1.84, at 1345 GMT. The light US Cruc CLc1 dropped $ 1.30 at $ 65.74.
Both contracts had recovered somewhat in recent days, but are now more than $ 10 a barrel below the four-year highs reached in the first week of October.
"Positive oil demand remains tight as a slowdown in demand continues to underpin selling pressure," said brokerage analyst PVM Oil analyst Stephen Brennock.
"This creates a bearish environment and is reinforced by a sassy dollar."
Oil was hit by the global slump in financial markets this month, with stocks under pressure from the trade dispute between the two largest economies in the world.
The International Energy Agency (IEA) said on Tuesday that high oil prices could hurt 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 the three producers alone now cover one third of global crude oil demand.
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.
Reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Cut by Dale Hudson and David Goodman