Even with U.S. sanctions on Iranian exports due to come into force on Nov. 4, oil prices have fallen about $10 a barrel since four-year highs reached in early October.
The prices edged lower on Monday as Russia signalled output will remain high, but losses were limited ahead of U.S. sanctions on Iranian exports that are expected to reduce supplies when they come into effect in just under a week.
Brent crude LCOc1 futures fell 21 cents to $77.41 a barrel by 12:56 p.m. EDT (1656 GMT). U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 41 cents to $67.18 a barrel.
Russian Energy Minister Alexander Novak said on Saturday there was no reason for Russia to freeze or cut its oil production levels, noting that there were risks that global oil markets could be facing a deficit.
The Organisation of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia and non-OPEC member Russia, agreed in June to lift oil supplies, but OPEC then signalled last week that it may have to reimpose output cuts as global inventories rise.
“When the Russians start talking about keeping the production levels high and even the possibility that they need to increase it because of a possible tightness in supply, that brought on some selling pressure,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
Industrial commodities such as crude and copper have also been rattled by hefty losses in global equities due to concern over corporate earnings, and fears over the impact to economic growth from escalating trade tensions, as well as a stronger dollar.
Though equity markets recovered on Monday, the benchmark S&P 500 was on track to post its worst monthly performance since May 2010.
The U.S. dollar index .DXY also rose, supported by robust U.S. consumer spending data. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.
“It is often said that when stock markets sneeze, commodities catch a cold. This adage was on full display last week as a global rout on equity gauges dragged the energy complex lower,” PVM Oil Associates strategist Stephen Brennock said.
European stocks bounce back, China growth worries linger
Fund managers have cut their bullish positions in crude futures and options for four weeks in a row to their lowest since July 2017, as the demand outlook grows more uncertain.
On the supply side, Iran has started selling crude to private companies via a domestic exchange for the first time, the oil ministry’s news website reported.
With just days to go before U.S. sanctions on Iran take effect, three of Iran’s top five customers – India, China, and Turkey – are resisting Washington’s call to end oil purchases outright, arguing there are not sufficient supplies worldwide to replace them, according to sources familiar with the matter.
That pressure, along with worries of a damaging oil price spike, is raising the possibility of bilateral deals to allow some buying to continue, according to the sources.