Oil prices fall on rising supply, trade tensions

Reuters  File

"Elsewhere, increased oil production from Saudi Arabia and Russian Federation have consequently eased concerns over a potential supply shock from the incoming Iranian sanctions", he added.

Moreover, Saudi Arabia's Energy Minister Khalid al-Falih said on Tuesday that the Organization of the Petroleum Exporting Countries (OPEC) and its partners are in "produce as much as you can" mode.

With the Chinese economy slowing down and the impact of the trade dispute with the US likely to hurt growth further, it is widely expected that crude demand will see a drop in the near term.

In terms of future oil prices, EIA's latest October Short-Term Energy Outlook (STEO) forecast that Brent crude oil spot prices, which averaged 70 dollars per barrel in September, are expected to average 81 dollars per barrel in the fourth quarter of 2018 and will fall to an average of 75 dollars per barrel in 2019.

"The hedge funds really abandoned the long side of the market and there's some short-selling going on this perception that perhaps the economy is slowing", said Phil Flynn, analyst at Price Futures Group in Chicago.

The Iranian first vice president further described Trump's decision to restore Iran sanctions as illegal, stressing that the move was against the diplomatic success that had culminated in the 2015 Iran nuclear deal or the Joint Comprehensive Plan of Action (JCPOA) - as is technically known.

Oil held losses near $67 a barrel on speculation that an escalating trade dispute between the United States and China will dampen global growth at a time when American crude inventories are growing.

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That has set off a scramble by some of Iran's biggest energy buyers, including China and USA allies such as India and Turkey, to either get around the US sanctions or make up the shortfall elsewhere.

Only 280,000 barrels were sold out of one million offered, and went for $74.85 per barrel, more than $4 below the initial asking price.

In North America, however, there is no oil shortage as United States crude oil production C-OUT-T-EIA has increased by nearly a third since mid-2016 to around 11 million barrels per day. Previously private oil companies could buy oil only to export oil, officials said.

The sanctions have triggered a black-market fueled by Iranian tankers - or "ghost ships" - that dismantle their vessel tracking systems, according to regional observers, making it extremely hard to estimate how much Iranian oil is on the market at any given moment.

Baghdad has been saying that it would abide by the US sanctions on Iran. -China trade war are stirring demand-growth concerns.

Crude oil futures fell Monday as investors reduced exposure, extending weakness that started a week ago amid increased investor caution in anticipation of a possible economic slowdown, an increase in oil production and a stronger dollar that could make oil more expensive in other currencies.

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