Oil Falls Below $73 on Rising Supply, Trade Worries
Oil extended losses on Wednesday to fall below $72 a barrel, pressured by an industry report that U.S. stockpiles of crude rose unexpectedly and higher OPEC production, adding to indications of more ample supply.
Concern of an imminent escalation in the trade war between the United Sates and China pressured equities and boosted the U.S. dollar, and also weighed on oil as slowing economies would curb demand.
On Tuesday, the American Petroleum Institute said crude inventories rose by 5.6 million barrels last week. Analysts had expected a decrease of 2.8 million. The U.S. government's supply report is due on Wednesday.
Brent crude, the global benchmark, dropped $1.31 to $72.90 a barrel by 1321 GMT, having fallen as low as $72.66. U.S. crude was down $1.05 at $67.71.
"A fresh dose of price angst has come from an unexpected source," said Stephen Brennock of oil broker PVM. "The U.S. has been flying the flag for the drawdown in global oil stockpiles, yet the rebalancing paused abruptly last week," he said, referring to the API report.
Last month, Brent fell more than 6 percent and U.S. crude slumped about 7 percent, the biggest monthly declines for both benchmarks since July 2016.
Oil also slipped on more ample supplies.
The Organization of the Petroleum Exporting Countries, plus Russia and other allies, decided in June to ease supply cuts that had been in place since 2017. OPEC production reached a 2018 high in July, a Reuters survey found on Monday.
Kuwait confirmed on Wednesday it had increased production in July. Output is currently 2.8 million barrels per day, its oil minister said, an increase of 100,000 bpd from June's average.
Signs that a supply disruption in the Bab al-Mandeb Strait in the Red Sea could be resolved also weighed on prices.
Yemen's Houthi group said it was ready to halt attacks in the Red Sea to support peace efforts. Saudi Arabia had suspended oil shipments through the strait last week after attacks on tankers.
Concern over slowing economic growth because of a trade dispute between the United States and China is also putting downward pressure on the market.
"Ratcheting up of trade tensions between the U.S. and China has brought oil prices under significant selling pressure," said Abhishek Kumar, senior energy analyst at Interfax Energy. "Market participants are awaiting additional tariffs by the U.S. on the next tranche of imported goods from China."
By Alex Lawler, Additional reporting by Aaron Sheldrick and Henning Gloystein