Brent, WTI Dip 2% on Uncertainties in Oil Market

By Adedapo Adesanya

The two major oil grades in the global crude oil market declined by about 2 per cent on Tuesday as investors watched developments around US tariffs, the war in Ukraine and the potential disruption of Russian fuel supplies.

Brent crude was down by $1.58 or 2.3 per cent to $67.22 a barrel and the US West Texas Intermediate (WTI) crude lost $1.55 or about 2.4 per cent to finish at $63.25 per barrel.

Uncertainties in the oil market caused by the Ukrainian conflict and the tariff war is making investors unwilling to commit themselves to either direction on a prolonged basis.

Supply risks after Ukraine strikes on Russian energy infrastructure and the possibility of further US sanctions on Russian oil remain, as Ukraine’s attacks in response to Russia’s advances in the conflict and its pounding of Ukrainian gas and power facilities have disrupted oil processing and exports and created petrol shortages in some parts of Russia.

Russia has revised up its crude oil export plan from western ports by 200,000 barrels per day in August from the initial schedule after Ukrainian drone attacks disrupted refinery operations and freed up more crude for shipment.

President Donald Trump of the United States has renewed his threat to impose sanctions on Russia if there is no progress towards a peace deal in the next two weeks.

However, Reuters reported that US and Russian government officials discussed several energy deals on the sidelines of this month’s negotiations to seek peace in Ukraine.

Meanwhile, Indian exports could face US duties of up to 50 per cent, making it among the highest imposed by the Trump administration. India is one of the two biggest crude buyers from Russia.

Market analysts noted that if the tariffs affect Indian purchases of Russian oil, this will have the opposite of a bearish impact on global prices, regardless of any estimates of a supply overhang.

Still on the supply side, according to Iran’s national oil company NIOC, the country’s oil production soared to the highest level since May 2018, reaching 3.24 million barrels per day in July.

Meanwhile, in China, the world’s largest importer, oil demand is picking up alongside imports. However, while the improvement is noticeable on a sequential basis, the data does not reflect the same on an annual basis, as demand was down, although imports were up on both bases.