Crude futures settled lower on Monday amid concerns of weaker global growth prospects and the possibility of oversupply after sanctions on Iran kick in.
ICE December Brent settled 28 cents lower at $77.34/b and NYMEX December WTI fell 55 cents lower to close at $67.04/b.
Reports the US was prepared to levy tariffs on all Chinese imports if high-level talks between presidents Donald Trump and Xi Jinping fail in November sent US equity markets lower and weighed on oil futures in afternoon trading.
The oil complex was already trading in negative territory ahead of those reports on the back of concerns that US sanctions on Iranian crude exports could be lower than expected.
Iran's exports are expected to plunge to 1.1 million b/d in October, and 1.7 million b/d of Iranian crude and condensate exports will likely leave the market by November compared with April levels in the wake of US sanctions, according to S&P Global Platts Analytics data.
In recent weeks, the market has been pricing in the risk of a supply crunch once Iranian barrels exit the market in November. But Monday media reports suggested Turkey, India and China were pushing back on US calls for a total cessation of imports from Iran next week.
Although most buyers of Iranian crude have found alternative supplies, it is unknown yet how committed they are to upholding compliance with the sanctions going forward, especially if the loss of the Iranian barrels leads to a run-up in oil prices. As a result, more Iranian crude may remain on the market, potentially tipping the market into oversupply.
"There is concern that some of Iran's biggest customers are balking a bit," Price Futures Group senior market analyst Phil Flynn said. "The mood of the market is very negative and there is some concern that maybe the Iranians will be able to skirt sanctions."
In addition, expectations of stronger crude runs last week were unlikely to curb rising US inventories due to a dip in exports, Platts analysis showed Monday. US commercial crude inventories likely rose 3.3 million barrels last week, according to analysts surveyed by Platts.
The anticipated build comes despite expectations of 0.63 percentage point increase in the refinery utilization rate last week, which would bring the rate up to around 89.83% of total capacity, according to analysts surveyed.
Product futures lacked direction on Monday. NYMEX November ULSD settled 1.87 cents lower at $2.2843/gal, but NYMEX November RBOB rose 99 points to $1.8249/gal.
