Oil declined for a third day as a deepening global slowdown looked set to coincide with an increase in supply from OPEC producers.
West Texas Intermediate futures slid below $89 a barrel after falling around 5% over the previous two sessions. Mounting signs of an economic downturn swept through markets on Monday as bearish US data including rapidly cooling manufacturing followed weaker-than-expected Chinese numbers.
Investors are also facing the prospect of rising supply as demand moderates, while prompt time spreads are signaling concerns over tight global markets are easing. Libya is pumping more and Iran is edging closer to reviving a nuclear deal that will likely see higher crude flows.
“Oil prices are being weighed down by a weaker macroeconomic outlook due to poor data from China as well as possible new supply from Iran,” said Sean Lim, a Malaysia-based oil and gas analyst at RHB Investment Bank Bhd. “However, even if the Iran deal passes, any ramp-up in oil production could still take time, so its immediate effect might not be too strong.”
Crude is trading near the lowest level in six months after giving up all of the gains following Russia’s invasion of Ukraine, which upended trade flows and drove prices as high as $130 a barrel. The market has also been gripped by bouts of volatility recently, exacerbated by the lower levels of liquidity.
While the market is backwardated, a bullish pattern marked by near-term prices commanding a premium to later-dates ones, the gap has narrowed significantly. Brent’s prompt spread was 67 cents in backwardation, compared with $2.08 at the start the month.
Iran sent the European Union its official response to the bloc’s proposal for reviving the 2015 nuclear accord after signaling it may be nearer a deal with the US. Foreign Minister Hossein Amirabdollahian said an agreement can be reached with Washington to restore the beleaguered accord in the next few days “if the US shows a realistic approach and flexibility.”
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