Oil prices fell on Tuesday, closing out the largest monthly decline in two years on supply worries after OPEC output reached a 2018 high in July, overshadowing reports that the United States and China might reopen trade talks that could boost demand.
October Brent crude futures (LCOV8) fell $1.34 to settle at $74.21 a barrel. The September contract (LCOU8), which expires later on Tuesday, settled at $74.25. U.S. crude futures (CLc1) fell $1.37, or nearly 2 percent, to settle at $68.76.
Brent lost more than 6 percent in July, while U.S. crude futures slumped about 7 percent, the biggest monthly decline for both benchmarks since July 2016.
Oil prices extended losses in post-settlement trade, with U.S. crude at $68.32 a barrel, after data from the American Petroleum Institute showed domestic crude inventories rose 5.6 million barrels last week.
The U.S. Energy Information Administration data is due on Wednesday.
Signs that a supply disruption in the Bab al-Mandeb Strait in the Red Sea could be resolved weighed on prices throughout the trading session, said John Kilduff, partner at Again Capital Management in New York.
Yemen’s Houthi group said it was ready to unilaterally halt attacks in the Red Sea to support peace efforts. Saudi Arabia suspended oil shipments through the strait last week after the Houthis attacked two Saudi oil tankers.
Russia and the Organization of the Petroleum Exporting Countries boosted output in July, according to a Reuters production survey on Monday. It showed OPEC members boosted output in July by 70,000 barrels per day (bpd) to 32.64 million bpd, a high for the year.
“We’re seeing some more production come online, so that weighs on prices,” said Phil Flynn, analyst at Price Futures Group in Chicago.
A Reuters poll showed that oil prices are likely to hold fairly steady this year and next as increased output from OPEC and the United States meets growing demand led by Asia and helps to offset supply disruptions.
OPEC has pledged to offset the loss of supply from Iran, the group’s No. 3 producer. Looming U.S. sanctions have already started to cut Iranian exports.
Iran said U.S. President Donald Trump was mistaken to expect Saudi Arabia and other oil producers to compensate for supply losses caused by U.S. sanctions.
The market largely overlooked reports that U.S. and China may restart negotiations to defuse the trade war between the two countries. An end to the ongoing trade dispute could boost overall oil-market demand.