An employee works on at a deep-water oil platform in the Gulf of Mexico. Picture: REUTERS
An employee works on at a deep-water oil platform in the Gulf of Mexico. Picture: REUTERS

London — Oil prices fell on Monday, as concern over the global economy put crude on track for its biggest monthly fall since mid-2016.

Brent crude oil futures were down 34c at $77.28 a barrel at 10.05am GMT, while US crude futures fell by 30c to $67.29.

Even with US sanctions on Iranian exports due to come into force in under a week, oil has lost nearly 7% in value this month, the largest percentage decline since July 2016.

Industrial commodities such as crude and copper have been rattled by hefty losses in global equities due to concern over corporate earnings, fears over economic growth amid escalating trade tensions, and a stronger dollar.

“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.

“Adding a further tailwind to the prevailing selling pressures are mounting concerns of a budding oversupply. Saudi Arabia and Russia are leading efforts to keep oil markets well supplied at the same time as the demand outlook darkens ... The Iranian factor has been put on the back burner and bullish blood will continue to be spilled in the oil market.”

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.

Data from the InterContinental Exchange and the US Commodity Futures Trading Commission shows combined bullish holdings of Brent and US crude futures and options have fallen by a third in four weeks, to around 572-million barrels.

This position was equivalent to nearly 1.2-billion barrels in January.

“The market is likely to focus its attention more on fundamental data again, especially with respect to possible supply bottlenecks in the coming months given that strict US sanctions on Iranian oil exports will come back into force from next week,” Commerzbank analysts wrote.

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 renewed sanctions take effect, three of Iran’s top five customers — India, China and Turkey — are resisting Washington’s call to end purchases outright, arguing there are not sufficient supplies worldwide to replace them, sources familiar with the matter said.

Reuters