An oil well is seen near Denver, Colorado. Picture: REUTERS
An oil well is seen near Denver, Colorado. Picture: REUTERS

Singapore — Oil prices dropped nearly 1% on Monday, with concerns a recession could be looming outweighing supply disruptions from Opec’s production cutbacks and US sanctions on Iran and Venezuela.

Brent crude oil futures were at $66.56 a barrel at 4.10am GMT, down 47c, or 0.7% from their last close.

US West Texas Intermediate futures were at $58.52 a barrel, down 52c or 0.9% from their previous settlement.

Both crude oil price benchmarks have slumped by more than 3% since last week, hitting their highest since November 2018.

Concern about a potential US recession resurfaced late last week after bearish remarks by the US Federal Reserve, with 10-year treasury yields slipping below the three-month rate for the first time since 2007.

Historically, an inverted yield curve, where long-term rates fall below short-term, has signalled an upcoming recession.

Adding to the fears of a more widespread global downturn, manufacturing output data from Germany, Europe’s biggest economy, shrunk for the third consecutive month.

“Estimates for growth and earnings have been revised down materially across all major regions,” said US bank Morgan Stanley.

ANZ bank said the darkening economic outlook “overshadowed the supply-side issues” the oil market was facing amid supply cuts led by Opec as well as US sanctions on Venezuela and Iran.

Opec and non-affiliated allies such as Russia, together referred to as Opec-plus, have pledged to withhold about 1.2-million barrels a day of oil supply this year to prop up markets, with Opec’s de-facto leader seen to be pushing for a crude price of over $70 a barrel.