KEY POINTS
- Brent rose 0.6% to $68.12 and WTI gained 0.7% to $64.08 as traders weighed risks.
- Ukrainian drone attacks hit Russian fuel infrastructure, raising concerns over exports.
- OPEC+ plans to add more supply in September, while U.S. tariffs threaten demand.
Monday saw a slight increase in oil prices as traders weighed the prospect of additional barrels entering the market from OPEC+ against geopolitical tensions that threatened Russian supply.
By mid-morning in London, Brent crude futures had increased 0.6% to $68.12 per barrel, while West Texas Intermediate had increased 0.7% to $64.08. Even as rising OPEC+ production continues to dampen sentiment, the gains coincided with fresh concerns about disruptions from the war in Ukraine.
Following Ukraine’s weekend attack on Russian energy facilities, market anxiety increased. Another fire at the Novoshakhtinsk refinery has been burning for four days in a row, and a huge fire at the Ust-Luga fuel terminal was started by a drone attack. With a daily capacity of 100,000 barrels, the refinery is a major fuel exporter.
Meanwhile, U.S. President Donald Trump reaffirmed his threats to impose additional sanctions on Moscow if peace negotiations don’t progress in the next two weeks. Additionally, he brought up the possibility of tariffs on India for purchasing Russian oil. Russia has made “significant concessions,” according to U.S. Vice President JD Vance, but doubts remain about whether the talks will be fruitful.
Geopolitical jitters collide with Fed rate signals and OPEC+ supply surge
According to analysts, a more relaxed outlook for the market is colliding with the risk of supply disruptions. According to Ole Hansen, head of commodity strategy at Saxo Bank, “the market is looking for supply to exceed demand in the autumn months, but that’s being challenged in the short term by geopolitical disruption.”
Millions more barrels have already entered the market as a result of OPEC+ reversing some of its previous production cuts. At a meeting on September 7, the group is expected to approve an additional boost, escalating the competition for market share.
Trade tensions continue to cloud the demand outlook. Traders are worried about slower global growth as a result of Trump’s repeated threats to impose tariffs on India and his ongoing disputes with China.
Nonetheless, there are signs of hope for risky assets. Jerome Powell, the chair of the Federal Reserve, hinted last week that a rate cut might be possible in September, which could support overall market sentiment.
Even so, oil has struggled for momentum. “Markets are increasingly convinced that tariffs will slow economic growth, and that’s capping prices despite the short-term supply risks,” said Priyanka Sachdeva, senior analyst at Phillip Nova.
