Oil prices dropped by over 1% due to the Libya port reopening, and expectations that Iran will continue to export some amount of crude despite US sanctions.

Brent crude LCOc1 dropped by $1 to $73.45 a barrel while US benchmark West Texas Intermediate crude CLc1 dropped by 22 cents to reach $70.11, reported Reuters.

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Oil price hit $80 in June and early this month, due to supply disruptions in Libya and Venezuela, and concerns over US sanctions on Iran increased the prices further.

Recent days have seen Libya port reopening its eastern ports, with US Secretary of State Mike Pompeo indicating that it may consider giving waivers to some of Iran’s crude buyers. These have plunged the prices, which further weakened due to concerns that a US-China trade dispute could impact global economic growth.

"While the oil market could not escape the mounting trade tensions and souring sentiment in financial markets, the sell-off was more about signs of rising supplies."

Julius Baer analyst Carsten Menke was quoted as saying: “While the oil market could not escape the mounting trade tensions and souring sentiment in financial markets, the sell-off was more about signs of rising supplies.”

“If Iran was blocked from the market, we believe oil prices would rise toward $90 per barrel, which would cause significant fuel inflation, weigh on consumer and business sentiment and eventually hurt the economy.”

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Yesterday, the International Energy Agency (IEA) warned the global market was short of any spare supply, and so any further disruptions could only increase oil prices further.

In its monthly report, IEA stated: “Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit.

“This vulnerability currently underpins oil prices and seems likely to continue doing so.”