INTERNATIONAL - A weakening global economic growth outlook and a report of rising US crude inventories weighed on oil prices on Wednesday, even as US sanctions threatened to curb Iranian crude supplies.
Benchmark Brent crude oil LCOc1 was down 60 cents a barrel at $71.86 (R1 049) by 10:40 GMT, while US light crude CLc1 fell $1.02 a barrel to a low of $66.02, before recovering slightly to around $66.30, down 74 cents.
“Oil bears are taking their turn in the driving seat,” said Stephen Brennock, an analyst at London broker PVM Oil Associates.
“Adding to the weakening price backdrop are signs that a deepening trade spat between the United States and China is undermining oil demand.”
US crude stocks rose by 3.7 million barrels in the week to August 10, to 410.8 million barrels, private industry group the American Petroleum Institute (API) said on Tuesday. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.6 million barrels, the API said.
Official US oil inventory data was due to be published later on Wednesday by the Energy Information Administration.
Investors are concerned by the health of the world economy at a time of escalating trade disputes between the US and its major trading partners.
The Organisation for Economic Co-operation and Development's (OECD’s) composite leading indicator, which covers the western advanced economies plus China, India, Russia, Brazil, Indonesia and South Africa, peaked in January but has since fallen and slipped below trend in May and June.
World trade volume growth also peaked in January at almost 5.7 percent year on year, but nearly halved to less than 3 percent by May, according to the Netherlands Bureau for Economic Policy Analysis.
The US and China have been locked in a tit-for-tat trade spat for a few months, gradually adding tariffs to each others’ products in a dispute that threatens to curb economic activity in both countries.
Chinese oil importers now appear to be shying away from buying US crude oil as they fear Beijing may decide to add the commodity to its tariff list.
Not a single tanker has loaded crude oil from the US bound for China since the start of August, Thomson Reuters Eikon ship tracking data showed, compared with about 300 000 barrels per day in June and July.
Meanwhile, investors are watching the impact of US sanctions on Tehran, which analysts say could remove as much as 1 million bpd of Iranian crude from the market by next year.
BMI Research said oil markets would “struggle for direction, as uncertainty around both the impact on supply from the Iranian sanctions and escalating trade tensions between the US and China persists”.