Crude oil drops on OPEC output, looming Iran sanctions prevent big fall

Brent crude oil prices dipped on Monday amid rising supply from OPEC and the United States, although expectations of falling Iranian output once US sanctions bite from November provided some support.

International Brent crude oil futures were at $77.59 per barrel at 0046 GMT, down 5 cents from their last close.

US West Texas Intermediate (WTI) crude futures were at $69.81 per barrel, virtually unchanged from their last settlement.

Output from the producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) rose by 220,000 barrels per day (bpd) between July and August, to a 2018-high of 32.79 million bpd, a Reuters survey found.

Output was boosted by a recovery in Libyan production and as Iraq's southern exports hit a record.

Meanwhile, US drillers added oil rigs for the first time in three weeks, energy services firm Baker Hughes reported on Friday, increasing the rig count by 2 units to 862.

The high rig count has helped lift US crude oil production by more than 30 per cent since mid-2016, to 11 million bpd.

Despite the dip, Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA said Brent was "supported by the notion that US sanctions on Iranian crude oil exports will eventually lead to constricted markets", which he said would likely push up prices.

"Iranian production is already showing signs of decline, falling by 150,000 barrels per day (bpd) last month ... (as) importers of Iranian barrels will already be moving away from taking shipments," said Edward Bell, commodity analyst at Emirates NBD bank in Dubai.

Many analysts have warned that an economic slowdown because of trade disputes between the United States and other major economies including China and the European Union would drag on oil demand.

OANDA's Innes said it was too early to say whether this would happen.

"While the analysts continue fretting that $200 billion in tariffs could drag down oil demand, it isn't at all clear that such type of economic headwinds will topple oil prices given ...the constant barrage of supply outages," he said.