* U.S. crude inventories rose for a sixth week: government data
* WTI futures slide as much as 1%, after an 11% drop last month

By Grant Smith and Tsuyoshi Inajima

(Bloomberg) —

Oil fell to the lowest in more than two months on signs of surging U.S. supply and speculation that American sanctions against Iran won’t succeed in reducing exports to zero.

Futures in New York dropped as much as 1 percent, after falling 1.3 percent on Wednesday. U.S. crude inventories rose for a sixth week, while Russia was said to raise oil output to a post-Soviet record. The supply surge comes just as concern eases around a halt of exports from Iran, with oil buyers India and South Korea said to agree with the U.S. on the outline of waivers.

Oil slid 11 percent last month, the most since July 2016, as an equity rout and trade tensions between the U.S. and China stoked concerns over economic growth. Still, the Organization of Petroleum Exporting Countries and its allies are sending mixed signals on whether they’ll boost output to fill any shortfall from the return of sanctions on Iran next week, heightening uncertainty.

“Rising oil inventories and growing petro-nations output have calmed the supply fears related to the Iran oil embargo,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich. “While in the near term, prices are at risk from any further supply disruption, oil should trend lower heading into 2019.”

West Texas Intermediate for December delivery fell as much as 66 cents to $64.65 a barrel on the New York Mercantile Exchange, the lowest since Aug. 16, and was at $64.85 as of 10:50 a.m. London time. The contract declined 3.4 percent in the past three sessions. Total volume traded Thursday was in line with the 100-day average.

Brent for January settlement fell 67 cents to $74.37 a barrel on the London-based ICE Futures Europe exchange, and traded at a $9.35 premium to WTI for the same month. The December contract dropped 44 cents to $75.47 before expiring Wednesday.

The U.S. signaled Wednesday that some countries may continue importing Iranian crude after sanctions enter into full force on Nov. 5. Several nations “may not be able to go all the way to zero” right away on purchases, said White House National Security Adviser John Bolton. America wants to put maximum pressure on Iran, but doesn’t “want to hurt friends,” he said.

Adding to bearishness are rising supplies in the U.S. and elsewhere. America’s stockpiles climbed by 3.22 million barrels last week in the longest streak of gains since March 2017, government data showed Wednesday.

A rally in the dollar has also diminished the appeal of commodities priced in the currency, with the Bloomberg Dollar Spot Index rising 2.3 percent in October, the biggest monthly gain since November 2016.

Other oil-market news

|* Russia’s oil and condensate output was said to be almost 11.41 million barrels a day last month, a new post-Soviet record.
* Also in Russia, oil companies have agreed to freeze wholesale prices for diesel and gasoline and increase crude supplies to domestic refineries, Deputy Prime Minister Dmitry Kozak told reporters.

* Iraq’s central government will start a dialogue with authorities in the semi-autonomous Kurdish region to discuss oil exports, Oil Minister Thamir Ghadhban said.
* Concerns over oil demand that are dragging down prices may prove excessive, according to Goldman Sachs Group Inc.

|To contact the reporters on this story:
Grant Smith in London at gsmith52@bloomberg.net;
Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net

To contact the editors responsible for this story:
James Herron at jherron9@bloomberg.net
Amanda Jordan, Helen Robertson