Oil prices slip as economic fears offset tightening crude supplies

© Reuters. FILE PHOTO: An employee demonstrates a sample of crude oil in the Yarakta Oil Field, owned by Irkutsk Oil Company (INK), in Irkutsk Region, Russia in this picture illustration taken March 11, 2019. REUTERS/Vasily Fedosenko/Illustration/File Photo

By Noah Browning

NEW YORK (Reuters) -Oil prices fell on Monday as concerns about slowing global growth outweighed the prospect of tightening supply after talks among key crude producers to raise output in the coming months stalled.

Brent crude for September fell 45 cents, or 0.6%, to $75.10 a barrel by 12:08 p.m. EDT (1605 GMT). U.S. West Texas Intermediate crude for August was at $74.07 a barrel, down 49 cents, or 0.7%.

Both benchmarks fell about 1% last week but remain close to highs not seen since October 2018.

The spread of coronavirus variants and unequal access to vaccines threaten the global economic recovery, finance chiefs of the G20 large economies said over the weekend. The remarks weighed on the oil demand outlook.

"Traders are now refocusing on the spread of the COVID-19 pandemic and global concerns over the new variants’ expansion," Rystad Energy analyst Louise Dickson said.

The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, abandoned talks last week over an output deal, which included pumping more oil from August, after a dispute between Saudi Arabia and the United Arab Emirates about how to extend the pact.

Although the failure to agree means less oil in the short term, analysts say the collapse of talks raises the longer term prospect of producers abandoning the deal and pumping at will.

"The longer the standoff ... the greater the possibility of some sustained price weakness," said Jim Ritterbusch of Ritterbusch and Associates in Houston. "For now, we still anticipate some movement this week with an OPEC + plan to disregard 2022 production quotas while focusing on the coming six months in which the UAE demands for less production restraint may be accommodated."

Saudi Arabia and Oman called for continued cooperation between OPEC and allied producers.

Meanwhile, oil stockpiles in the biggest crude producing nation continued to tighten, with U.S. inventories falling to the lowest since February 2020 in the week to July 2. Analysts polled by Reuters estimate U.S. crude in storage fell by about 4.3 million barrels in the week to July 9. [EIA/S]