Oil dips as Iraq exports rise amid demand concerns

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices settled marginally lower on Monday as concerns of an oversupply outweighed geopolitical tensions in Russia and the Middle East.

Brent crude oil futures settled 11 cents, or 0.2%, lower at $66.57 a barrel. The global benchmark has traded between $65.50 and $69 since early August.

U.S. West Texas Intermediate crude (WTI)contract for October, expiring on Monday, closed down at $62.64 a barrel, down 4 cents, or 0.1%. The more actively traded second-month contract was down 12 cents, or 0.2%, at $62.28.

"Traders are back to focusing on a possibly over-supplied global oil market that is soon to come, unless the U.S. and EU can agree on harsher tariffs on countries that purchase Russian crude," said Dennis Kissler, senior vice president of trading at BOK Financial.

Iraq, the Organization of the Petroleum Exporting Countries' second-largest producer, has increased oil exports under an OPEC+ agreement, state oil marketer SOMO said. It also expects September's exports to range from 3.4 million to 3.45 million barrels per day (bpd). 

Kuwait's crude oil production capacity stands at 3.2 million bpd, the highest assessment in more than 10 years, Oil Minister Tariq Al-Roumi told local newspaper Al Qabas.

U.S. equities, which often move in tandem with oil, dipped amid a visa crackdown and guesswork about the Federal Reserve's next interest rate moves.

Fed officials cast doubt on the need for further rate cuts at a time when inflation remains above the central bank's 2% target and the job market remains near full employment. Lower borrowing costs typically boost oil demand. 

Tensions rose in the Middle East over several Western nations recognising a Palestinian state, as well as in Eastern Europe after Estonia said Russian fighter jets had entered its airspace without permission on Friday. But none of these developments resulted in an immediate oil supply disruption.

Brent and WTI settled down more than 1% on Friday to mark a slight decline last week as worries about large supplies and declining demand weighed on sentiment.

"The setup for the oil market is that global oil demand is set to taper off from Q3 to Q4 and again to Q1-26. At the same time production by OPEC+ is on a rising path," said SEB analysts.

"The big question is, of course, if China will stockpile the increasing surplus or whether the oil price will be pushed lower into the 50s. We believe the latter."

Iraq has also given preliminary approval to a plan to resume pipeline oil exports from its semi-autonomous Kurdistan region through Turkey, sources told Reuters. 

(Additional reporting by Florence Tan and Mohi Narayan; Editing by Bernadette Baum, Joe Bavier, William Maclean and Marguerita Choy)