Oil fell by more than 2 percent on Monday, pressured by a rise in Russian production, expectations that Saudi Arabia will cut prices of the crude it sends to Asia and a deepening trade spat between China and the United States, APA reports quoting Reuters.
Brent crude LCOc1 fell $1.70, or 2.5 percent, to settle at $67.64 a barrel. That was the lowest level since March 21. U.S. crude CLc1 lost $1.93, or 3 percent, to settle at $63.01, its lowest since March 20.
Trade sources told Reuters on Monday that Saudi Arabia was expected to cut prices for all crude grades it sells to Asia in May to reflect weaker prices for its Middle East benchmark Dubai crude.
“There is speculation that the Saudis are going to lower prices for their Asian customers,” said Bob Yawger, director of energy futures at Mizuho in New York. “That is not really the kind of thing you do when you want to keep production cuts in place.”
Production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and Russia have lifted oil prices in the past year.
Despite the supply cut agreement, Russian output rose in March to 10.97 million bpd from 10.95 million bpd in February, official data showed.
Also, in an escalation of the dispute between the world’s biggest economies, China increased tariffs by up to 25 percent on 128 U.S. products.
“Increasing trade friction between China and the U.S. is likely to rock global markets and tarnish bullish sentiment in crude oil markets,” said Wang Xiao of Guotai Junan Futures.
Brent crude reached a 2018 high of $71.28 in January but has
since struggled to pass that level. Two rallies last week ran out of steam just beyond $71, a chart pattern known as a double top, which is usually bearish.
Another bearish factor is Bahrain’s discovery of its largest oilfield in decades, analyst John Macaluso of Tyche Capital Advisors said.
Rising U.S. crude production has also limited price gains. Official data released on Friday showed output rose by 6,000 bpd in January to 9.964 million bpd.
U.S. crude stocks in Cushing, Oklahoma, are now close to their minimums, which means that inventory data this week will likely show a build, Yawger said. That would be bearish for prices, he said.
U.S.-Iranian tensions lent some support to crude.
“The Iranian factor is going to be a very significant input for the next four weeks,” said Olivier Jakob of Petromatrix.
U.S. President Donald Trump threatened to pull out of a 2015 international nuclear deal with Tehran under which Iranian oil exports have risen. He gave European signatories a May 12 deadline to fix the deal.