Oil drops more than 1.5% as storm fears ease, demand concerns mount

A drilling crew member on an oil rig in the Permian Basin near Wink, Texas.
Nick Oxford | Reuters

Oil prices fell about 1 percent on Wednesday after a U.S. Gulf storm weakened and moved away from oil-producing areas, and on mounting concerns about global trade disputes and Turkey's currency crisis hurting demand.

U.S. West Texas Intermediate (WTI) crude futures fell $1.15 to settle at $68.72 a barrel. Brent crude fell 91 cents to $77.26 a barrel. The global benchmark had climbed in the previous session to $79.72 a barrel, its highest since May.

Crude jumped on Tuesday as oil companies shut dozens of offshore platforms in anticipation of damage from Tropical Storm Gordon. The storm, however, never became a hurricane and by Wednesday energy companies and port operators along the U.S. Gulf Coast took steps to resume operations.

The storm "appears to have bypassed major crude production alleys as well as the Gulf coast refining infrastructure," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Oil also weakened as the United States-China trade dispute raised demand worries. Trump could impose levies on $200 billion more of Chinese imports after a public comment period on the new tariffs ends on Thursday.

OPEC Secretary-General Mohammad Barkindo said global trade disputes could hurt energy demand in the future.

Also weighing on crude futures was a currency crisis in Turkey. The lira has fallen more than 40 percent this year .

"Fears of Turkey's currency crisis spreading to other emerging markets have prompted demand-side concerns," said Abhishek Kumar, senior energy analyst at Interfax Energy.

Oil could draw some support if weekly reports on U.S. inventories show a drop in crude inventories, as expected. Analysts estimate, on average, that stocks fell by about 1.9 million barrels last week.

The American Petroleum Institute, an industry group, releases its supply report at 4:30 p.m. EDT (2030 GMT) on Wednesday, a day later than usual because of the U.S. Labor Day holiday on Monday. Official government figures were also delayed to Thursday.

U.S. sanctions targeting Iran's oil sector from November are already reducing exports from OPEC's third-largest producer and counteracting the impact of an agreement by OPEC and its allies to pump more oil.

"With the anticipation of up to 1.5 million barrels per day affected by the U.S. sanctions on Iran, one would expect prices to move higher in the weeks ahead," said Stephen Innes, of futures brokerage OANDA.