Picture: REUTERS
Picture: REUTERS

New York — Oil fell on Tuesday ahead of a possible increase in oil cartel Opec crude supply, and as an escalating trade dispute between the US and China unleashed sharp sell-offs in many global markets.

Brent crude futures eased 60c, or 0.8%, to $74.74 a barrel by 3.31pm GMT, while US West Texas Intermediate (WTI) crude futures fell $1.01, or 1.6%, to $64.84 a barrel.

"WTI is more vulnerable to spillover from today’s hard sell-off in global equities than is Brent as the differential between the two benchmarks has stretched back to above $10 a barrel," Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a note.

"Brent is being relatively supported this week by increasing concerns over lost Libyan supply in which as much as 400,000 barrels per day (bpd) of output has been impacted by an attack on two key terminals," he wrote.

Both benchmarks are being dragged down by the escalating trade conflict between the US and China. The two countries are threatening punitive tariffs on each other’s exports, which could include oil.

Chinese stocks fell to their lowest in almost a year, while in the US, all three major stock indices were down, with the Dow Jones Industrial Average erasing its gains for the year.

On Friday, Opec and its allies are set to meet in Vienna, where they are expected to update their 2017 supply-withholding agreement. Expectations are growing that Opec and partner Russia will increase production to make up for output declines in Venezuela and potential shortfalls from Iran, which is facing renewed US sanctions.

Russia and Saudi Arabia are pushing for a steep production increase, with Russian energy minister Alexander Novak saying he wanted to raise output by 1.5-million bpd.

"We share the general expectation that supply quotas will be increased, but probably more in line with the smaller range being quoted [300,000 to 600,000 bpd] given the lack of consensus among Opec members," said Jack Allardyce, oil and gas research analyst at Cantor Fitzgerald Europe.

Oil traders are closely watching China’s threat to place a 25% duty on US crude oil imports, which have surged since 2017 to a value of almost $1bn per month. An escalation of the trade conflict between the two biggest economies could result in a decline in global oil demand, analysts said.