Brent inches higher as trade tensions undermine oversupply concerns

The front-month ICE Brent contract has gained by $0.17/bbl on the day, to trade at $68.58/bbl at 09.00 GMT.

IMAGE: Crude oil storage tanks. Getty Images

Upward pressure:

The oil market is awaiting clarity on possible secondary tariffs targeting Russian oil buyers, as US President Donald Trump’s deadline for a Russia-Ukraine peace deal approaches on Friday.  

So far, the US administration has threatened India with penalties for purchasing Russian energy products but has remained relatively quiet about the continued flow of Russian oil to China.

“Much of the noise in recent weeks has centred on India facing such tariffs,” said two analysts from ING Bank. “However, market chatter is growing that China’s purchases of Russian oil may come into focus next,” they added.

If there are no countries willing to purchase Russian oil, including India, it would remove the expected oil surplus later this year and in 2026, the two analysts remarked. “This [removal of Russian crude from the market] would leave some upside to prices, but a manageable one,” they added.

Downward pressure:

Brent crude has continued to trade below the $70/bbl mark after Saudi Arabia-led OPEC+ oil producers’ group announced another round of production boost.

Over the weekend, eight member countries of the alliance agreed to raise their collective output by 547,000 b/d in September, bringing forward previously planned supply additions.

“The oil market is unraveling as OPEC unravels its production cuts,” said Price Futures Group’s senior market analyst Phil Flynn.

OPEC+ has offered limited insight into the status of the wider production curbs implemented two years ago, which continue to withhold 1.66 million b/d from the market.

“The OPEC voluntary production story is now history and oil price are taking it hard,” Flynn added.

By Aparupa Mazumder

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