The price of the Brent crude futures went down by $1.22 or 1.9 per cent to $64.40 a barrel on Tuesday and the US West Texas Intermediate (WTI) crude futures depreciated by $1.16 or 1.9 per cent to $60.15 per barrel due to fears that supply could overrun demand for the commodity.
Both benchmarks last week registered their biggest weekly gains since June, reacting to US President Donald Trump’s decision to impose Ukraine-related sanctions on Russia for the first time in his second term, targeting major oil companies Lukoil and Rosneft.
However, on Tuesday, investors considered the impact of US sanctions against Russia’s two biggest oil companies on global supply, along with a potential plan by the Organisation of the Petroleum Exporting Countries and allies (OPEC+) to raise supply.
The executive director of the International Energy Agency, Mr Fatih Birol, said yesterday that the effect of sanctions on oil-exporting countries will be limited because of surplus capacity.
Following the US sanctions, Russia’s second-largest oil producer, Lukoil, said on Monday it would sell its international assets.
This move is the most consequential action so far by a Russian company in the wake of Western sanctions over Russia’s full-scale war in Ukraine, which started in February 2022.
Indian refiners have not placed new orders for Russian oil purchases since the sanctions were imposed, as they await clarity from the government and suppliers.
Also, Oil India Limited (OIL), the state-owned oil and gas explorer, has $300 million in dividends from its stakes in Russian oilfields stuck at Russian banks and unable to withdraw.
OPEC+ is increasing leaning toward another modest output boost in December. The group had seen some members increase output over the last six months.
Having curbed production for several years to support the oil market, the group started reversing those cuts in April.
The market is also weighing the prospect of a trade deal between the US and China, the world’s two biggest oil consumers, with Trump and President Xi Jinping due to meet on Thursday in South Korea.
The American Petroleum Institute (API) estimated that crude oil inventories in the US saw a large dip of 4 million barrels in the week ending October 24. Gasoline (petrol) inventories fell by 6.35 million barrels, while distillate inventories fell by 4.36 million barrels from a week earlier.
Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.