Oil prices drop as wave of supply meets global economic gloom

By David Gaffen

NEW YORK (Reuters) - Oil fell on Thursday, with U.S. crude futures hitting lows not seen since April, due to rising concerns over weaker global demand and increased supply from the world's major oil producers.

With Russia pumping oil at a post-Soviet high, U.S. crude output at more than 11 million barrels per day (bpd), concerns about renewed U.S. sanctions on Iran have faded in recent days.

A Wednesday Reuters survey of OPEC production showed the group made up for declines in Iranian shipments in October by boosting production to its highest level since 2016.

Brent crude futures fell $2.24 a barrel to $72.81 a barrel as of 1:26 p.m. EST (1726 GMT), while U.S. futures were down $1.76 a barrel at $63.56. Brent's fall took it to its lowest level since August.

Both benchmarks posted their biggest monthly percentage decline since July 2016 in October, with Brent down 8.8 percent for the month and U.S. crude losing nearly 11 percent.

"The sellers seem to be in charge," said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. The increase in OPEC production "has really started to tamp down concerns surrounding the loss of Iranian barrels."

U.S. crude futures broke through the $65 level that had held in place for the last several months, raising the possibility of further selling. More than 645 million contracts changed hands on Thursday, exceeding the 200-day moving average of 576 million contracts a day.

"We're approaching areas where the market should start to find support," McGillian said. "The downside move is pretty exaggerated."

Oil has been under pressure on growing concern over a possible slowdown in global growth as the U.S-China trade dispute remains unresolved, and is starting to hit emerging market economies in particular.

That will offset the decline in Iranian exports that could tighten supply. China's imports from Iran fell by 34 percent in September from the year-ago period, official Chinese customs data showed.

U.S. sanctions on Iran's energy exports come into force on Nov. 4 and it is still unclear how much the country's roughly 3.8 mln bpd production will be affected.

China's manufacturing sector in October expanded at its weakest pace in over two years, hurt by slowing domestic and external demand, in a sign of deepening cracks in the economy from the trade war with the United States.

"Oil investors are now betting on the potential of a global slowdown," said Bruce Xue, an analyst with Huatai Great Wall Capital Management.

(Additional reporting by Amanda Cooper in London and Meng Meng and Aizhu Chen in Beijing; Editing by Susan Thomas and Marguerita Choy)