Oil prices drop on oversupply concerns as OPEC output increased in July

Oil markets still pressured by persistent risk of oversupply

September WTI fell 92 cents, or 1.32%, to settle at $$68.69 a barrel, for a weekly gain of 0.6%. It has rebounded to above $70 a barrel since April as the Opec cartel, which pumps a third of the world's crude, cut supplies to bring the market back into balance. An attack by the Houthis on two crude oil vessels in the Red Sea forced Saudi Arabia to halt oil shipments through Bab Al Mendeb strait, which saw 4.8 mbpd of crude oil shipped through it in 2016. The September contract expires today.

Prices remain buoyed by a tight supply outlook, with global inventories down from record highs in 2017 and US inventories at a three-year low, said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.

USA crude futures were down 38 cents, or 0.6 percent, at $68.38 a barrel, having dropped almost 2 percent on Tuesday.

The price for Brent crude oil, the global benchmark for the price of oil, was down 0.73 percent as of 9:15 a.m. EDT to $75 per barrel. A Reuters poll had forecast a fall of 2.8 million barrels. The bulk of the Saudi supply boost appears to have been delivered in June as Riyadh tapped storage tanks to push supply to 10.60 million bpd, near a record high.

OPEC's oil production jumped to a 2018 high in July, as Saudi Arabia and its close Gulf allies boosted production, a Reuters survey showed on Monday.

Opec hiked production by 70,000 barrels a day to 32.64 million barrels a day, a 2018 high.

"Prices shed some of yesterday's gains overnight", said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.

"Despite a rise in refinery runs, a cratering in crude exports last week yielded a whopping crude build of 5.6 million barrels on the Gulf Coast - leading to a solid build of 3.8 million barrels for total USA stocks", said Matt Smith, director of commodities research at ClipperData.

The oil price has been rallying nearly uninterruptedly for the past two weeks, in part as trade tensions between the United States and China have heated up, but also as looming sanctions on Iran have already started to curtail flows of oil from the country.

Oil held an advance near $70 a barrel as the threat of production disruptions from the United Kingdom to Saudi Arabia loomed over global supplies.

OPEC, together with Russian Federation and a group of other producers, last November extended an output-cutting deal to cover all of 2018.

Exports fell as returning USA sanctions discouraged companies from buying the country´s oil.

Oil was steady near $70/bbl as supply risks from Saudi Arabia to the United Kingdom threaten to strain global markets.

"They are also calling for the use of the U.S. SPR [Strategic Petroleum Reserve]".

Analysts polled by IG Group had expected a slight inventory decline of 200,000 barrels, after the previous week's major, 6.1-million-barrel draw reported by the EIA.

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