Oil falls on trade fears after Trump tariff threat

Oil prices rise as looming Norway strike adds to disruptions

The market shrugged off bullish government data showing US crude stockpiles slumped by almost 13 million barrels last week, the biggest slide in almost two years.

"In spite of the extraordinary draw in crude oil inventories, the market is under pressure after refiners produced a record amount of gasoline this week and in conjunction with a greater than expected build in distillate inventories", said Andrew Lipow, president at Lipow Oil Associates in Houston.

The decline in overall inventories was partially due to a fall-off in stocks at the Cushing, Oklahoma, delivery hub for US crude futures, which were down by 2.1 million barrels.

Brent crude fell $2.10, or 2.7 percent, to a low of $76.76 before recovering slightly to $77.20, down $1.66, by 1208 GMT. "If these tariffs are introduced there will be an impact on global growth and demand".

Libya's national oil production fell to 527,000 barrels per day from a high of 1.28 million bpd in February following recent oil port closures, the head of the National Oil Corporation said in a statement on Monday. A further escalation of trade disputes could depress demand for oil from China and elsewhere.

"In 2019, EIA forecasts that the United States will average almost 12 million barrels of crude oil production per day", said Linda Capuano, Administrator of the EIA.

"Libyan relief changes the conversation about spare capacity", said John Kilduff, a partner at Again Capital Management.

It comes as Donald Trump's top diplomat hinted the United States could grant waivers to some countries allowing them to continue importing Iranian crude oil even after sanctions are reimposed in November.

Isolating Iran could sideline millions of barrels of oil per day from a market with little spare capacity left.

Hundreds of workers on Norwegian oil and gas offshore rigs are due to strike on Tuesday after rejecting a proposed wage deal, a move which will likely affect the production of at least one field, Shell's Knarr.

Isolating Iran from the oil market should have minimum market disruptions because of close cooperation with Saudi Arabia, a USA official said.

Saudi Arabia, fellow members of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russian Federation agreed last month to increase output to dampen price gains and offset global production losses in countries including Libya.

Supply to the USA market has also been squeezed by the loss of some Canadian oil production.

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