Oil prices weakened on Tuesday (August 5th) on concerns about oversupply as OPEC+ continued significant production increases despite a weak demand outlook. This increase was more than enough to offset potential tightening of the Russian oil trade due to US policy.

Brent crude futures fell 11 cents, or 0.16%, to $68.65 per barrel at 04:24 GMT. US West Texas Intermediate crude futures fell 12 cents, or 0.18%, to $66.17 per barrel.

This was the fourth consecutive decline for both contracts, which had previously fallen more than 1% in the previous session and hit their lowest levels in a week. Both benchmarks have weakened as additional capacity from OPEC+ acts as a buffer against Russian supply shortages, said Priyanka Sachdeva, senior market analyst at Phillip Nova.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed on Sunday to increase oil production by 547,000 barrels per day for September. This marks a full and initial reversal of the group's largest production cuts, which amounted to about 2.5 million barrels per day, or about 2.4% of global demand, although analysts warn the actual amount returning to the market will be less.

This increase in supply is coupled with concerns about demand, with some analysts predicting slower economic growth in the second half of the year. JPMorgan analysts said on Tuesday that the risk of a US recession is high as labor demand has stagnated. Furthermore, China's Politburo meeting in July signaled no additional policy easing, with the focus shifting to structural rebalancing of the world's second-largest economy, the analysts wrote in a note.

The outlook for weak economic fundamentals overshadows concerns about possible supply disruptions that have previously supported oil prices. US President Donald Trump has said he could impose 100% secondary tariffs on buyers of Russian crude oil, such as India, after announcing 25% tariffs on Indian imports in July.

On Monday, Trump again threatened higher tariffs on Indian goods over purchases of Russian oil. New Delhi called his attack "unjustified" and vowed to protect its economic interests, deepening a trade rift between the two countries.

India is the largest buyer of seaborne crude oil from Russia, importing about 1.75 million barrels per day from January to June this year, up 1% from a year ago, according to data provided to Reuters by trade sources. Traders are also awaiting developments on the latest US tariffs on its trading partners, which analysts fear could slow economic growth and reduce fuel demand. (alg)

Source: Reuters