Crude slipped to the lowest in more than two weeks as investors weighed a potential production surge from Saudi Arabia and Russia against concern that Iranian sanctions will trigger a global supply crunch.
Futures in New York fell for a fourth day, closing down 0.3 per cent on Monday. While South Korea has become the first of Iran’s top-three oil customers to fulfil a US demand that buyers cut imports to zero, speculation that Saudi Arabia and Russia will fill in any supply gaps helped to wipe away a rally. A trade war between US and China and expectations for a supply rise at the key US storage hub at Cushing, Oklahoma, also pressured the market lower.
Investors will be watching to see if “the Russians and the Saudis continue to put more oil on the market. That will basically negate some of the worries about tightening supply,” said Gene McGillian, manager of market research at Tradition Energy. At the same time, Trump’s fresh tariff threats don’t really “sit well with the demand side of the market.”
While China and India, larger consumers, curbed buying from the OPEC producer, South Korea went a step further by halting purchases before the US imposes sanctions on the Islamic republic on 4 November. Meanwhile, US President Donald Trump doubled down on his threats to impose higher tariffs on China’s goods, saying on Friday he’s ready to tax all imports on short notice.
West Texas Intermediate for October delivery dropped 21 cents to settle at $67.54 a barrel on the New York Mercantile Exchange. Total volume traded Monday was about 11 per cent below the 100-day average.
In the US, crude stockpiles at Cushing, Oklahoma, increased 900,000 barrels last week, according to a forecast compiled by Bloomberg. That would be a fifth straight weekly rise in supplies if the Energy Information Administration confirms it on Wednesday.
Front-month WTI crude futures shrunk to a 13-cent premium to its second-month contract, the smallest premium since June.
“If Cushing continues to build, the spreads are going to get weaker,” said Tariq Zahir, a commodity fund manager at Tyche Capital Advisors LLC.
Brent for November settlement rose 54 cents to end the session at $77.37 a barrel on the ICE Futures Europe exchange. Brent’s premium to the US marker is at the widest since late June, with the global benchmark trading at a $9.96 premium to WTI.
Meanwhile, in Libya, the National Oil Corp. will carry out operations as usual across the country after security forces quashed a deadly attack on the state company’s headquarters in the capital Tripoli, the NOC’s chairman said.