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

Oil prices fell on Tuesday, with Brent futures set for their biggest monthly loss in two years, on oversupply concerns after a report showed OPEC's output in July rose to its highest for 2018.

September Brent crude futures fell 46 cents, or 0.6 percent, to $74.51 a barrel by 0356 GMT after rising nearly 1 percent on Monday. The September contract expires today and the more-active October contract was down 0.5 percent to $75.20.

US West Texas Intermediate crude futures (WTI) were down 43 cents, or 0.6 percent, at $69.70 a barrel, after rising more than 2 percent in the previous session.

For the month, Brent futures are set to drop 6.2 percent, the most since July 2016, while WTI futures set to decline 5.9 percent to, the biggest monthly drop since March 2017.

A Reuters survey showed the Organization of the Petroleum Exporting Countries (OPEC) increased production in July.

OPEC hiked production by 70,000 barrels per day (bpd) to 32.64 million bpd, the most this year. The group has pledged to reduce the amount of oil output they are curtailing to offset the loss of Iranian supply as looming sanctions have already started to cut exports from OPEC's third-largest producer.

US President Donald Trump appeared to soften his approach to Iran, saying on Monday he would meet with President Hassan Rouhani without any preconditions. This was only a week after he threatened on Twitter to unleash severe consequences on the country. 

The United States has indicated that it wants Iranian exports cut to zero under the sanctions it pledged to reintroduce in May and that would go fully into effect in November.

While the market was softer on Tuesday, some support for prices might be found in inventory data to be released this week.

Six analysts polled ahead of reports from the American Petroleum Institute (API), an industry group, and the US Department of Energy's Energy Information Administration (EIA) estimated, on average, that crude stocks fell about 3.2 million barrels in the week ended July 27.

"Inventories are getting really tight at Cushing," Greg McKenna, chief market strategist at AxiTrader said. "Inventory data is of uber-import right now."

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.

Energy information company Genscape said that inventories at Cushing, Oklahoma, the delivery point for the WTI futures contract, rose almost 200,000 barrels, or nearly 1 percent, from Tuesday to Friday last week, according to traders.