Oil prices fall, because a "trio of problems" can lead to an overabundance

Oil prices fell nearly 2 percent on Thursday as investors focused on increasing the global supply of crude, which was growing faster than expected.

The market is focused on record US crude production and on signals from Iraq, Abu Dhabi and Indonesia, according to which production is expected to grow faster than expected in the US. 2019. Fears of a potential overabundance of supply hampered a recovery early in the session, driven by Chinese data on record oil imports.

"There is a tripta of problems created by US stocks, overproduction by OPEC and the easing of sanctions imposed by Iran," said Bob Yawger, director of futures trading at Mizuho in New York.

The global benchmark, gross brent, lost 1.42%, or 1.97%, to settle at $ 70.65 a barrel, its lowest level since mid-August. US futures contracts fell $ 1.00, or 1.6%, to $ 60.67 a barrel, their lowest level since March 14th.

In post-settlement transactions, both contracts extended the losses.

China's crude oil imports reached 9.61 million barrels per day (bpd) in October, up 32 percent from the previous year, according to customs data.

China will still be allowed to import Iranian crude under a waiver of US sanctions allowing it to buy 360,000 b / d for 180 days, two sources close to the case said Reuters told Reuters on Tuesday.

US crude output reached a new record of 11.6 million barrels a day over the past week and has now overtaken Russia as the world's largest oil producer. The upward movement in production was a big jump, "not just a tick," said Yawger.

The US Energy Information Administration announced this week that it expects production of more than 12 million bpd by mid-2019, thanks to shale oil.

Even with US sanctions against Iranian oil in place, investors believe that supply is more than enough to meet demand. The exemptions granted to sanctions reinforce the perception of the market that sanctions can not limit the supply of crude as originally planned.

This view is reflected in the price charts showing Brent January futures negotiated at a discount in February. This price structure, known as contango, is materialized when market players believe that there is an overabundance of supply and decide to stockpile oil rather than sell it. This creates an even larger pool of unsold crude.

Some market observers believe that the Organization of Petroleum Exporting Countries and its allies, including Russia, could take steps to reduce supply.

"The OPEC and Russia can use (production) cuts to support $ 70 a barrel," said Ole Hansen, product strategy manager for Saxo Bank.

The largest think tank funded by the Saudi government is currently studying the possible effects of a break-up of OPEC on oil markets, the Wall Street Journal reported on Thursday, citing people close to the issue. The research project does not reflect an active debate within the government on the opportunity to leave the Organization of Petroleum Exporting Countries in the short term, the Journal reported.