LONDON: Oil prices fell for a third day on Thursday, nearing their lowest in two weeks following a surprise increase in US crude inventories that added to existing concern about the rapid rise in global crude supply.
Saudi Arabia, Russia, Kuwait and the United Arab Emirates have increased production, as agreed at a meeting in June, to help to compensate for an anticipated shortfall in Iranian crude supplies once US sanctions come into force later this year.
Brent crude futures were down 35 cents at $72.04 a barrel by 1345 GMT, while US crude futures fell 35 cents to $67.31.
"There's been a lot of bearish news over the last week. We've seen the OPEC July numbers increasing quite drastically month-on-month and along with that, Russian production back at pre-deal levels," ING commodities strategist Warren Patterson said.
The Organization of the Petroleum Exporting Countries and partners including Russia had agreed in late 2016 to cut output by 1.8 million barrels per day to rebalance supply and demand.
"Oil is holding up reasonably well ... A lot of this is the risk premium priced in for Iran and when do we start seeing an impact on supply there," Patterson said.
"At the moment, there is a mismatch in timing, where there is increasing OPEC supply and yet we're not seeing a significant reduction in Iranian supply," Patterson said.
The United States believes Iran is preparing to carry out a major exercise in the Gulf in coming days, apparently moving up the timing of annual drills amid heightened tensions with Washington, US officials told Reuters on Wednesday.
US President Donald Trump's decision to pull out of an international nuclear deal and reimpose sanctions on Iran has angered Tehran. Iranian officials have warned the country would not easily yield to a renewed US campaign to strangle Iran's vital oil exports.
"There are a lot of escalation points that could occur very quickly and that worries me," Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney, said.
Oil prices are also feeling the effects of tensions over global trade, which could cause economic growth to slow.
Trump has turned up pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion of Chinese imports and China has said it will retaliate.
"It is almost certain that China will impose additional duties on oil and refined products imported from the US if the Trump administration implements additional tariffs on the next tranche of Chinese goods. This could severely dent the competitiveness of US oil and derivatives in the Chinese market," said Abhishek Kumar, senior energy analyst at Interfax Energy.
US crude inventories rose by 3.8 million barrels last week as exports declined, creating the largest increase in Gulf Coast stocks since March, the Energy Information Administration said. Analysts polled by Reuters had expected a decline of 2.8 million barrels.
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