Oil prices fell on Monday as supplies from Saudi Arabia and Russia rose while economic growth stumbled in Asia amid an escalating trade dispute with the United States.
Brent crude oil LCOc1 fell $1.24 a barrel to a low of $77.99 before recovering to $78.53, down 70 cents, by 1305 GMT. U.S. light crude CLc1 was down 20 cents at $73.95 a barrel.
Oil prices rose strongly last week, with the U.S. crude contract hitting its highest in 3-1/2 years at $74.46.
But a flurry of U.S. announcements over the weekend unsettled oil markets.
President Donald Trump tweeted on Saturday that Saudi Arabia’s King Salman bin Abdulaziz Al Saud had agreed to pump more oil, “maybe up to 2,000,000 barrels”. The White House later walked back on the comments.
Saudi Arabia’s output is up by 700,000 barrels per day (bpd) from May, a Reuters survey showed, and close to its 10.72 million bpd record from November 2016.
Russian output rose to 11.06 million bpd in June from 10.97 million bpd in May, the Energy Ministry said on Monday.
U.S. production C-OUT-T-EIA has soared 30 percent in the past two years, to 10.9 million bpd, meaning the world’s three biggest oil producers now churn out almost 11 million bpd each, meeting a third of global oil demand.
Also weighing on oil demand are trade disputes between the United States and other major economies including China, the European Union, India and Canada.
China, Japan and South Korea all reported slowdowns in export orders in June amid escalating trade disputes with the United States.
“Recurring salvos in the trade war and falling asset prices raise the question of how much tariffs could damage the global economy,” U.S. bank JPMorgan said.
The bank said a “medium-intensity (trade) conflict would likely reduce global economic growth by at least 0.5 percent, “before accounting for tighter financial conditions and sentiment shocks”.
Despite the relief from Saudi Arabia and Russia, oil markets remain tense because of unplanned outages from Canada to Venezuela and Libya.
Looming U.S. sanctions against Iran further contribute to expected tightness.
Trump threatened in an interview that aired on Sunday to put sanctions on European companies that do business with Iran.
“The Trump administration’s plan for Iran sanctions is now abundantly clear. They seek to push Iranian exports of crude, condensate, and oil products to zero,” energy consultancy FGE said in a note.