Oil prices edged down on Tuesday after surging nearly 2% in the previous session, as traders kept a close watch on developments in the Russia-Ukraine conflict.
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Oil prices gained ground on Tuesday, as Ukraine war escalations raised questions over the resilience of Russian supplies, while uncertainty lingers over the impact of Washington’s policies on key oil consumers.
Brent futures with November expiry were at $69.46 per barrel at 10:54 a.m. London time ( 5:54 a.m. E.T.), up 1.92% from the Monday close.
The front-month October Nymex WTI contract was trading at $65.97 per barrel, higher by 3.06%. WTI futures did not settle on Monday because of the U.S. Labor holiday.
Russia supply
Moscow and Kyiv have ramped up fire exchanges in their three-and-a-half-year conflict, with Reuters calculations pointing to Ukrainian drone attacks shutting down facilities accounting for at least 17% of Russia’s oil processing capacity. CNBC could not independently verify the report.
Ukrainian President Volodymyr Zelenskyy vowed “new deep strikes” against Russia in a social media post over the weekend, without disclosing details. His pledge comes amid stalling U.S. and European efforts to draw Kremlin leader Vladimir Putin into conceding to bilateral ceasefire talks with his Ukrainian counterpart.
The White House has separately piled on indirect pressure on Russia’s oil consumers, implementing additional levies on imports of Indian goods it attributed to New Delhi’s ongoing purchases of Moscow’s crude. India has criticized the impositions as “unfair, unjustified and unreasonable.”
In a further sign of deteriorating relations, U.S. President Donald Trump on Monday doubled down on lambasting Washington’s trade ties with India as a “totally one sided disaster.”
Critically, Washington has yet to move against China, the world’s largest crude importer and Russia’s biggest oil buyer since the introduction of G7 sanctions. Putin, Chinese President Xi Jinping and Indian Prime Minister Narendra Modi met at this week’s Shanghai Cooperation Organization (SCO) summit, in a show of Global South unity.
OPEC+
Also on the supply side, oil investors are looking out for output policy signals from an eight-member subset of the OPEC+ alliance – comprising heavyweights Russia and Saudi Arabia, alongside Algeria, Iraq, Kazakhstan, Kuwait, Oman and the United Arab Emirates – which are due to deliberate potential production steps on Sept. 7. The group, which recently expedited unwinding a 2.2-million-barrels-per-day production cut, is widely seen as unlikely to change course on strategy this week.
“We believe, just like the broader market, that the group will leave production levels unchanged for October,” ING analysts said Tuesday. “The scale of the surplus through next year means it’s unlikely the group will bring additional supply onto the market. The bigger risk is OPEC+ deciding to reinstate supply cuts, given concerns about a surplus.”
U.S. rates
Market participants are likewise following this week’s release of the U.S. August job report, expected to be factored into the U.S. Federal Reserve’s monetary policy meeting of Sept. 16-17. The Fed is currently widely expected to lower interest rates at the time, in a move that could echo into a softer greenback and push up demand for U.S.-denominated commodities, such as oil.
