Oil prices dropped Monday, with talk of a possible release from global crude reserves and data from the International Monetary Fund showing a slowdown in global economic growth pushing prices for global benchmark Brent crude toward their lowest finish in about three months.
A highly anticipated meeting between President Donald Trump and his Russian counterpart, Vladimir Putin, didn't appear to offer any fresh news for the oil market, despite expectations that Trump would push for stronger oil production from Russia to help ease crude prices.
September Brent crude LCOU8, -3.56% the international benchmark, declined $2.55, or 3.4%, to $72.78 a barrel on the ICE Futures Europe exchange, which would be the lowest finish for a most-active contract since April 17. Brent prices fell by 2.3% last week.
August West Texas Intermediate crude CLQ8, -3.37% the U.S. benchmark, fell $2.55, or 3.6%, to $68.46 a barrel on the New York Mercantile Exchange. A settlement around this level would be the lowest since June 25 for most-active contract, according to FactSet data. WTI lost 3.8% for last week.
“The market is on the defensive because of the potential release of oil from global reserves,” said Phil Flynn, senior market analyst at Price Futures Group.
The Trump administration is considering a release from the U.S. Strategic Petroleum Reserve, though a draw down from the stockpile of crude is not imminent, The Wall Street Journal reported Friday, citing people familiar with the matter.
The U.S. government is “coming under increased pressure as a result of rising gasoline prices, with national average gasoline prices up almost 16% since the start of the year,” according to analysts at ING Bank.
Fatih Birol, director of the International Energy Agency, also said at a private dinner last month that a release from global oil reserves was an option if supply outages worsen, the WSJ reported, citing dinner attendees.
Oil traders also fretted over a potential slowdown in the global economy, which could hurt demand for oil. The IMF on Monday said that growth is slowing in the euro area, Japan and the United Kingdom and warned that a further escalation of trade tensions stands as the greatest near-term threat to global growth.
Meanwhile, news reports haven’t mentioned any fresh developments related to oil from Trump and Putin’s meeting in Helsinki.
The Organization of the Petroleum Exporting Countries and oil producing allies like Russia, which have been holding back output since the start of last year, agreed in late June to begin increasing production by up to one million barrels a day amid global supply disruptions.
“Oil’s sell-off is a continuation of the downward move that began earlier this month when the market realised that the supply of crude is set to rise,” said Fawad Razaqzada, technical analyst at Forex.com.
Libyan oil production has resumed and more output is expected to hit the market from OPEC “as we head further into the second half of this year, most notably from Saudi Arabia,” he said. “The breakdown of key support levels have further exacerbated the sell-off and Brent looks like it may break another one at $72.50 which could pave the way for $70.00.”
The Energy Information Administration is scheduled to release its monthly Drilling Productivity Report later Monday, which will offer a forecast on U.S. shale oil production for the month of August.
