Brent facing biggest monthly slide in two years on supply rise

[July 31, 2018]   By Amanda Cooper

LONDON (Reuters) - Sliding Brent crude futures were on track for their biggest monthly loss in two years on Tuesday after a Reuters survey showed OPEC's oil output hit a 2018 high in July, reigniting concern about supply overtaking demand.

October Brent crude futures were down 35 cents at $75.20 per barrel by 0911 GMT. The September contract expires later on Tuesday.

U.S. crude futures fell 42 cents to $69.71 a barrel, after having risen more than 2 percent the day before.

Brent has fallen by around 6 percent in July in its largest one-month slide since July 2016. U.S. futures have fallen by slightly less than this, but are still on track for their biggest monthly decline since last October.

A Reuters survey on Monday showed OPEC increased production in July by 70,000 barrels per day (bpd) to 32.64 million bpd, a high for the year.

Russian energy minister Alexander Novak said last week that Russia's output will hit a new 30-year high of 11.02 million bpd IN 2018. [OPEC/O]

OPEC has pledged to offset the loss of Iranian supply as upcoming U.S. sanctions have already started to cut exports from OPEC's third-largest producer.

"On the supply side, the latest news from Russia shows they increased production by around 300,000 bpd ... as well as an increase in production in the OPEC survey," Saxo Bank senior manager Ole Hansen said.

"The global balance (between supply and demand) has softened and has been less tight in July, hence the sell-off we've seen."

An oil tanker unloads crude oil at a crude oil terminal in Zhoushan, Zhejiang province, China July 4, 2018. REUTERS/Stringer

U.S. President Donald Trump appeared to soften his approach to Iran, saying on Monday he would be willing to meet with President Hassan Rouhani without any preconditions. Just a week ago Trump threatened on Twitter to unleash severe consequences on Iran .

The United States has indicated that it wants Iranian exports to hit zero under the sanctions it pledged to reintroduce in May. These go into full effect in November.

Weekly U.S. inventory data is scheduled for release beginning on Tuesday with the American Petroleum Institute (API), an industry group, followed by the U.S. Department of Energy's Energy Information Administration (EIA) on Wednesday.

Six analysts polled ahead of these reports estimated, on average, that crude stocks fell by about 3.2 million barrels in the week ended July 27.

The API is scheduled to release its data for last week at 4:30 p.m. EDT (2030 GMT) on Tuesday and the EIA report is due at 10:30 a.m. EDT on Wednesday.

(Additional reporting by Aaron Sheldrick in TOKYO; editing by Jason Neely)

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