Crude oil prices were lower on Monday as concerns of an oversupply outweighed geopolitical tensions in Russia and the Middle East, with Brent crude shedding 11 cents or 0.2 per cent to close at $66.57 a barrel and the US West Texas Intermediate (WTI) crude down by 4 cents or 0.1 per cent to settle at $62.64 a barrel.
Market analysts said traders are focusing on a possibly oversupplied global oil market that is soon to come, but said this could be avoided if the US and the European Union (EU) can agree on harsher tariffs on countries that purchase Russian crude.
Also, Iraq, the second largest producer among the Organisation of the Petroleum Exporting Countries (OPEC), has increased oil exports under an OPEC+ agreement. It also expects September’s exports to range from 3.4 million to 3.45 million barrels per day.
Iraq has also given preliminary approval to a plan to resume pipeline oil exports from its semi-autonomous Kurdistan region through Turkey.
Kuwait’s crude oil production capacity stands at 3.2 million barrels per day, the highest assessment in more than 10 years, according to its Oil Minister, Mr Tariq Al-Roumi. Despite the increased production capacity, Kuwait continues to abide by the OPEC+ agreements and will pump 2.559 million barrels per day from October, he added.
Earlier this year, Kuwait said it plans to invest as much as $50 billion to raise its oil production capacity to above 3 million barrels per day over the next five years.
There was also doubt on the need for further rate cuts at a time when inflation in the US remains above the central bank’s 2 per cent 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. Countries including Britain, Canada, France, Australia and Portugal have recognised a Palestinian state in a move borne out of frustration over the Gaza war and intended to promote a two-state solution, prompting a furious response from Israel.
Tension also mounted in Eastern Europe after Estonia said Russian fighter jets had entered its airspace without permission on Friday. However, none of these developments resulted in an immediate oil supply disruption.