Oil slides more than $3 on inflation and Iraq exports

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria March 21, 2016. REUTERS/Leonhard Foeger

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LONDON, Aug 30 (Reuters) – Oil prices fell more than $3 a barrel on Tuesday on fears that an inflation-induced weakening in global economies could dampen demand for fuel and Iraqi crude exports will not have been affected by the clashes.

Brent futures for October settlement fell $3.90, or 3.71%, to $101.19 a barrel at 1340 GMT after hitting a session low of 100.90 $ per barrel.

The October contract expires on Wednesday and the more active November contract was at $99.59, down 3.24%.

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U.S. West Texas Intermediate crude fell $3.60, or 3.71%, to $93.41.

Inflation is near double-digit territory in many of the world’s largest economies, a level not seen in nearly half a century. This could prompt central banks in the United States and Europe to resort to more aggressive interest rate hikes, which could dampen economic growth and weigh on fuel demand. Read more

“The economy will continue to remain sluggish with the Fed’s aggressive monetary policies. Investors are now awaiting monthly jobs data on Friday,” said Kunal Sawhney, managing director at equity researcher Kalkine Group.

Prices fell after comments from Iraqi state-owned distributor SOMO that the country’s oil exports are unaffected by the unrest, UBS analyst Giovanni Staunovo said. Read more

Baghdad’s worst fighting in years between Shia Muslim groups stretched into a second day on Tuesday. Read more

SOMO also said on Tuesday it could redirect more oil to Europe if needed. Read more

Increased price pressure has come from Russia’s fastest growing oil producer Gazprom Neft (SIBN.MM) saying it plans to double oil production from its Zhagrin field in Western Siberia to more than 110,000 barrels per day. Read more

Meanwhile, the market awaits the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, collectively known as OPEC+, on September 5.

Saudi Arabia last week raised the possibility of OPEC+ production cuts, which sources say could coincide with increased supplies from Iran if it strikes a nuclear deal with the West .

The American Petroleum Institute is due to release data on U.S. crude oil inventories at 4:30 p.m. EDT (2030 GMT) on Tuesday.

U.S. crude oil inventories are expected to have fallen in the week to August 26, a preliminary Reuters poll showed on Monday.

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Reporting by Rowena Edwards Additional reporting by Muyu Xu in Singapore Editing by Louise Heavens and David Goodman

Our standards: The Thomson Reuters Trust Principles.

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