NEW YORK (Reuters)

Oil prices fell about three per cent on Tuesday (August 16) to their lowest since before Russia’s invasion of Ukraine as economic data spurred concerns about a potential global recession, while the market awaited clarity on talks to revive a deal that could allow more Iranian oil exports.

Brent crude futures fell $2.76, or 2.9 per cent, to settle at US$92.34 a barrel. The contract hit a session low of $91.71 per barrel, the lowest since February 18.

West Texas Intermediate crude (WTI) shed $2.88, or 3.2 per cent, to settle at US$86.53 a barrel. The benchmark fell to a session low of $85.73 per barrel, the lowest since January 26.

The contracts fell about three per cent in their previous sessions.

The European Union (EU) is assessing Iran’s response to what the bloc has called its “final” proposal to save a 2015 nuclear deal, and consulting with the United States, an EU spokesperson said on Tuesday.

Iran responded to the proposal late on Monday but none of the parties provided any details.

“It is still unclear what Iran has told the European Union last night, so some tricky items might impact the outcome of the nuclear deal,” UBS analyst Giovanni Staunovo said.

Weak economic indicators weighed on prices.

US homebuilding fell to the lowest level in nearly one-to-one-and-a-half years in July, weighed down by higher mortgage rates and prices for construction materials, suggesting the housing market could contract further in the third quarter.

“Oil traders reacted because of concerns about an economic slowdown and housing uses energy,” said Phil Flynn, an analyst at Price Futures group. “That caught us by surprise.”

China’s central bank cut lending rates to try to revive demand as the nation’s economy slowed unexpectedly in July after Beijing’s zero-COVID policy and a property crisis slowed factory and retail activity.

State media quoted Premier Li Keqiang as saying that China will reasonably step up macro policy support for the economy.

Barclays cut its Brent price forecasts by US$8 per barrel for this year and next, as it expects a large surplus of crude oil over the near term due to “resilient” Russian supplies.

Market participants awaited industry data on US oil inventories expected later on Tuesday. Crude and gasoline stockpiles likely fell last week, while distillate inventories rose, a preliminary Reuters poll showed on Monday.