Oil prices closed at their lowest in about a month overnight as renewed doubts over a US-China trade deal stoked concerns over global growth and on expectations that US crude stockpiles could hit fresh 19-month highs.
Brent futures fell $US1.36, or 1.9 per cent, to settle at $US69.88 a barrel, while US West Texas Intermediate slipped 85 US cents, or 1.4 per cent, to end at $US61.40.
Those were the lowest settles for Brent since April 4 and WTI since March 29.
“WTI has been beaten down during the past couple of weeks by some unexpectedly large crude supply increases,” Jim Ritterbusch, president of Ritterbusch and Associates in Chicago, said in a report.
US crude stocks have climbed to their highest since September 2017 and were forecast to have added another 1.2 million barrels last week, according to analysts in a Reuters poll.
The poll was conducted ahead of weekly reports from the American Petroleum Institute (API), an industry group, and from the Energy Information Administration (EIA) on Wednesday.
US crude production, meanwhile, is expected to rise to an all-time high of 12.5 million barrels per day (bpd) in 2019 from a record 11.0 bpd in 2018, according to the EIA’s Short-Term Energy Outlook.
US President Donald Trump said on Sunday he would raise tariffs on $US200 billion worth of Chinese goods from 10-25 per cent by Friday.
The comments dragged on both Asian and US stock markets.
“Sell-off in the broad market has trickled down to the oil markets today, indicating that investors believe the odds of a trade deal being reached by Friday are diminishing,” said Rob Thummel, portfolio manager at energy investment manager Tortoise in Leawood, Kansas.
On the supply side, oil markets remain tense with the United States tightening sanctions on Iranian oil exports and plans to bulk up its forces in the world’s top oil-exporting region.
US officials announced on Sunday that the movement of an aircraft carrier strike group and a bomber task force towards the Middle East was meant to counter “credible threats,” but the Iranian government dismissed the move as “psychological warfare”.
US sanctions have already halved Iranian crude exports over the past year to less than 1 million bpd, with shipments to customers expected to drop to as low as 500,000 bpd in May as sanctions tighten.
US Energy Secretary Rick Perry said that Saudi Arabia was increasing its oil production to meet needs arising from sanctions on Iran.
Bank of America Merrill Lynch said it expected Saudi Arabia “to bring back oil production slowly as Iranian barrels exit the market,” adding that it expects Brent to have a floor at $US70 a barrel in current market conditions.
Some analysts, however, predicted production curbs agreed by the Saudi-led Organisation of the Petroleum Exporting Countries and other producers such as Russia would continue to boost prices.
“The recent Brent pullback has taken prices too low in the face of tight fundamentals and growing supply risks, just as refiners come back from extended spring turnarounds,” Goldman Sachs said.