Global benchmark Brent crude oil hit a three-month low on Tuesday as worries over supply disruptions eased and the focus moved to increasing production and potential damage to global growth from the U.S.-China trade dispute.
Benchmark Brent crude oil LCOc1 fell 49 cents to an intraday low of $71.35 a barrel, its lowest since April 17, before recovering to around $71.65, down 19 cents, by 1020 GMT. Brent fell 4.6 percent on Monday.
U.S. light crude CLc1 was down 15 cents at $67.91 a barrel. It lost 4.2 percent on Monday.
“The perception in the oil market seems to be shifting,” Carsten Menke, commodity research analyst at Swiss private bank Julius Baer, said.
“Fears of shortages, which pushed prices as high as $80 per barrel in early summer, are receding and concerns about looming surpluses growing.”
Oil prices have fallen by almost 10 percent over the last week as crude export terminals in Libya have reopened and exports from other OPEC countries and Russia have improved.
Production from seven major U.S. shale oil formations is expected to rise by 143,000 barrels per day (bpd) to a record 7.47 million bpd in August, the U.S. Energy Information Administration said on Monday.
Output is expected to rise in all seven formations. All shale regions except for Appalachia are at a high.
Also undermining prices is concern the growing trade war between the United States and other major trading blocs, particularly, China, could dampen economic activity and hence squeeze oil demand.
China this week reported slightly slower growth for the second quarter and the weakest expansion in factory activity in June in two years, suggesting a further softening in business conditions in coming months as trade pressures build.
Beijing’s state planning agency said it was still confident of hitting its economic growth target of around 6.5 percent this year, despite views that it faces a bumpy second-half as the trade row with Washington intensifies.
Goldman Sachs said it expects price volatility in to remain elevated, keeping Brent in a $70-$80 per barrel range in the short term.
“Supply shifts, alongside the ongoing surge in Saudi production, create the risk that the oil market moves into surplus” in the third quarter, the report said.
But supply disruptions continue elsewhere.
Although Libyan ports are reopening, output at its Sharara oilfield was expected to fall by at least 160,000 barrels per day (bpd), the National Oil Corporation said.