Crude posted the biggest monthly loss since July 2016 as a slew of factors from threats of weaker demand to key OPEC producers boosting output weighed on the market.
Futures in New York lost 7.3 per cent in July as some of the largest producers, such as Saudi Arabia, are seen raising supply levels.
The drop was exacerbated Tuesday amid low-volume trading and a strengthening dollar. Meanwhile, U.S. President Donald Trump said he would be willing to meet Iranian President Hassan Rouhani with “no preconditions” following Trump’s decision to withdraw from a 2015 nuclear deal.
“It’s some of these concerns about oversupply with OPEC. There are also starting to be concerns about the slowdown or the plateauing in demand," said Ashley Petersen, lead oil analyst at Stratas Advisors in New York. Still, the low volume is indicative of “the summer doldrums. The prices are down, but the activity actually hasn’t been that high.”
The U.S. benchmark crude declined in July as trade tensions between the U.S. and China weighed heavily on the market and as production from Saudi Arabia and Russia surged. Output in the U.S. remained at record levels. Consultants JBC Energy estimated that Saudi Arabia raised production by 310,000 barrels a day to 10.8 million a day in July.
West Texas Intermediate crude for September delivery fell US$1.37 to settle at US$68.76 a barrel on the New York Mercantile Exchange. Total volume traded was about 35 per cent below the 100-day average.
Brent for September settlement, which expires Tuesday, slid 72 cents US to end the session at US$74.25 a barrel on the London-based ICE Futures Europe exchange.
The global benchmark traded at a US$5.49 premium to September WTI. The more active Brent October contract lost US$1.34 to close at US$74.21.
The Bloomberg Dollar Spot Index rose as much as 0.2 per cent.
“I would certainly meet with Iran if they wanted to meet,” Trump said Monday during a joint press conference at the White House with Italian Prime Minister Giuseppe Conte. “I don’t know if they’re ready. They’re having a hard time.”
Yet, the White House said the U.S. will end sanctions on Iran only if the Islamic Republic changes its behavior.
In the U.S., crude inventories are forecast to have dropped by three million barrels last week, according to a Bloomberg survey of analysts before government data is released on Wednesday. Stockpiles at the Cushing storage hub in Oklahoma decreased 500,000 barrels last week, according to a forecast compiled by Bloomberg.
The industry-funded American Petroleum Institute will release its weekly tally of inventories later on Tuesday.
OTHER OIL MARKET NEWS:
Gasoline futures slipped 1.4 per cent to settle at US$2.1291 a gallon.
The U.S. and China are trying to restart talks aimed at averting a full-blown trade war between the world’s two largest economies, two people familiar with the effort said.
Kuwait Foreign Petroleum Exploration Co. is borrowing US$1.1 billion to spend on oil and natural gas projects as the company plans to expand its shale operations, Chief Executive Officer Sheikh Nawaf Saud Al-Sabah said.
Mexico spent about 13.8 billion pesos (US$740 million) in the first half of 2018 from its budget stabilization fund, which historically has been used exclusively to hedge forward oil prices, according to a quarterly report.