Oil prices drop on worries about oversupply

Tokyo, Japan Published: Jul 24, 2018, 12:59 PM(IST)

File photo Photograph:( Reuters )

Oil prices extended declines into the second session on Tuesday as attention shifted to the risk of oversupply, with market participants shrugging off escalating tensions between the United States and Iran.

Brent crude oil was down 19 cents, or 0.3 per cent, at $72.87 a barrel by 0345 GMT, after settling down 1 cent on Monday. The US crude was down 21 cents, or 0.3 per cent, at $67.68 a barrel. The contract fell 37 cents the previous day.

Earlier in Monday`s session, the market had risen after President Donald Trump warned of dire consequences for Iran if it threatened the United States.

"While oil prices were the primary beneficiary of the weekend`s headline battle between President Trump and Iranian President Rouhani, that boost started to fizzle as traders then veered to oversupply concerns," said Stephen Innes, head of trading for APAC at brokerage OANDA.

Iran has been under increasing pressure from the United States, with Trump`s administration pushing countries to cut all imports of Iranian oil since November.

Saudi Arabia and large producers are ramping up output to offset losses that are likely to come as the November deadline approaches. 

Meanwhile, US crude inventories at the delivery hub at Cushing, Oklahoma gained in the four days to Friday, according to information supplier Genscape, traders said. 

On a weekly basis, stockpiles at the hub were expected to fall for the 10th consecutive week, traders said.

The market has also been dented by concerns about the impact on global economic growth and energy demand of escalating disputes over global trade. 

G20 finance leaders on the weekend voiced concern about the risk to global growth from trade tensions between the United States and China, among others.

"The lingering trade war effects continue to raise global growth concerns that continue to dampen sentiment," Innes said.

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