Crude oil prices fell on Monday after the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed to another large output increase in September.
Brent crude was down by 91 cents or 1.3 per cent to $68.76 a barrel, and the US West Texas Intermediate (WTI) crude declined by $1.04 or 1.5 per cent to $66.29 a barrel.
OPEC+ agreed on Sunday to raise oil production by 547,000 barrels per day for September, making it the latest in a series of accelerated output increases aimed at capturing market share.
The development was in line with market expectations and marks a full and early reversal of the group’s largest tranche of output cuts, amounting to about 2.5 million barrels per day, or about 2.4 per cent of global demand.
Analysts at Goldman Sachs expect the actual increase in supply from the eight OPEC+ countries that have raised output since March will be 1.7 million barrels per day because other members have cut output after overproducing.
Meanwhile, there is the possibility of further supply increases from OPEC+, with potential discussions to unwind a further 1.65 million barrels per day of cuts at the group’s next meeting on September 7 adding pressure to oil prices.
Adding to oversupply concerns after U.S. data showed lacklustre fuel demand in the top consuming nation.
Data released by the US government last week showed the weakest gasoline demand in May, the start of the country’s summer driving season, since the COVID-19 pandemic of 2020.
The data also showed US oil production at a monthly record high in May, adding to global oversupply concerns.
The impact of the latest US tariffs on exports from dozens of trading partners remain on the market which also wary of further US sanctions on Russia.
US President Donald Trump has threatened to impose 100 per cent secondary tariffs on Russian crude buyers as he seeks to pressure Moscow into halting its war in Ukraine.
The American President on Monday said he will substantially raise tariffs on India over its purchases of Russian oil, after it was reported that the country will keep buying oil from Russia despite US threats.
ING analysts said in a note that about 1.7 million barrels per day of crude supply will be at risk if Indian refiners stop buying Russian oil.