China committed to Iranian oil and gas

Oil falls more than 2 percent as Cushing build adds to demand fears

The American Petroleum Institute (API) showed late-Tuesday that U.S. crude stocks rose by 3.7 million barrels in the week to August 10, to 410.8 million barrels.

Crude slid to the lowest in seven weeks as economic turbulence in Turkey and the strengthening greenback heightened concerns about global oil demand.

U.S. West Texas Intermediate (WTI) crude futures were down 5 cents at $67.58 per barrel.

Futures for September delivery increased 1.2 per cent to 519 yuan (S$104) a barrel on the Shanghai International Energy Exchange.

Despite the gloomy outlook for trade and the potential slowdown in economic growth, oil markets are expected to remain relatively tight, particularly as USA sanctions on Iran have started.

Should the global economic outlook darken further amid trade disputes and emerging market turmoil, oil demand in Asia could worsen.

Brent for October settlement traded at US$72.61 a barrel on the London-based ICE Futures Europe exchange, down 20 U.S. cents.

Prices have been suppressed below US$70 this month as fears of a trade war between the U.S. and China temper gains, with neither side showing signs of backing down.

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This is compounding worries that a deepening trade war between the United States, China and the European Union will squeeze business activity in the world's biggest economies. As growth in the Eurozone and in China (the world's largest importers of crude oil) continue to decelerate, demand is softening accordingly.

The futures markets were further weakened late in the session after data from industry group the American Petroleum Institute (API) showed that USA crude stocks unexpectedly rose by 3.7 million barrels the week-ending August 10, compared with analysts' expectations for a drawdown of 2.5 million barrels.

Iran's oil exports peaked at nearly 3 million bpd in May this year, but they have since fallen to around 2 million bpd as Asian buyers, including Japan, South Korea and India, began to shun its crude ahead of the sanctions.

But output from non-OPEC countries, particularly the United States, is rising quickly, limiting demand for OPEC oil.

OPEC itself, using secondary sources, estimated in a report published on Monday that Saudi production was at a slightly higher level of 10.39 million bpd last month.

Brent crude has fallen back to about $72 a barrel as the questions over demand have offset concerns over supply disruptions, such as U.S. sanctions on Iran, which had helped to propel the global oil benchmark to highs of $80 a barrel in May.

Despite these worries, prices got a boost from USA sanctions against Iran, which from November will affect oil exports from that country.

The Organization of the Petroleum Exporting Countries forecast lower demand for its crude next year as rivals pump more and said top oil exporter Saudi Arabia, eager to avoid a return of oversupply, had cut production.

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