Oil prices dipped in early Asian trade on Tuesday, trimming gains from the previous session as oversupply concerns outweighed optimism over a potential resolution to the US government shutdown.
Brent crude futures fell 13 cents, or 0.2 per cent, to $63.93 a barrel by 0100 GMT. US West Texas Intermediate crude was at $60 a barrel, also down 13 cents, or 0.2 per cent.
Both benchmarks gained around 40 cents in the previous session.
The longest government shutdown in US history could end this week after a compromise that would restore federal funding cleared an initial Senate hurdle late on Sunday, though it was unclear when Congress would give its final approval.
While progress toward reopening the government has boosted markets broadly, worries about crude oversupply are keeping a lid on oil prices.
“As OPEC production increases grind on, global oil balances are acquiring an increasingly bearish hue on the supply side of the ledger with demand still trending lower in conjunction with a slowed economic growth path among major oil-consuming countries,” analysts at energy advisory firm Ritterbusch and Associates said in a note.
Earlier this month, OPEC+ agreed to increase December output targets by 137,000 barrels per day, the same as for October and November. It also agreed to a pause in increases in the first quarter of next year.
Market attention also remained focused on the impact of the latest US sanctions by President Donald Trump targeting Russian oil majors Rosneft and Lukoil.
Sources told Reuters on Monday that Lukoil declared force majeure at its Iraqi oil field and Bulgaria was poised to seize its Burgas refinery, as the Russian company’s international operations buckled under the strain of sanctions. The force majeure at the West Qurna-2 field in Iraq marks the biggest fallout yet from the sanctions imposed last month.
Elsewhere, the volume of oil stored onboard ships in Asian waters doubled in recent weeks after tightening Western sanctions hit exports to China and India and import quota limits curbed demand from independent Chinese refiners, analysts said. Some refiners in China and India have switched to buying oil from the Middle East and elsewhere.
One potential challenge to oil’s bearish outlook “is the extent to which China will continue to push Russian supplies into strategic stockpiles and whether India will succumb to Trump’s suggestions that the country defer further purchases from Russia,” Ritterbusch added.
