Oil drops after Opec+ supply hike amplifies concerns over glut
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Crude is coming off the back of a three-month winning run, although prices slumped on Aug 1 as soft US jobs data raised concern that the world’s largest economy was slowing.
PHOTO: REUTERS
SYDNEY – Oil fell after Opec+ agreed to another major output increase, stoking concerns about global oversupply just as the US-led trade war may be exacting a toll on economic growth and energy consumption.
Brent edged lower towards US$69 a barrel, while West Texas Intermediate was near US$67, after the Organisation of Petroleum Exporting Countries and its allies endorsed an additional 547,000 barrels a day of output from September, in line with expectations.
Another layer of about 1.66 million barrels a day of curbed supply may follow, although there is no clear signalling.
Crude is coming off the back of a three-month winning run, although prices slumped on Aug 1 as soft US jobs data raised concern that the world’s largest economy was slowing following the Trump administration’s wave of tariffs.
Still, traders are weighing the possibility that Washington may also move later this week against Russian oil flows, including buyers such as India, in a bid to raise the pressure against Moscow to pause the war in Ukraine.
“While Opec+ policy remains flexible and the geopolitical outlook uncertain, we assume that Opec+ keeps required production unchanged after September,” Goldman Sachs Group said in a note. The bank retained forecasts for Brent to average at US$64 a barrel in the fourth quarter, followed by a drop to US$56 in 2026.
The September output hike announced by Opec+ at the weekend stands to complete the reversal of a cutback made by an eight-member sub-group in the alliance, including Saudi Arabia and Russia, in 2023.
The progressive restoration of supplies over recent months has been widely seen as a concerted push by the cartel to reclaim market share against rivals such as US shale drillers.
With uncertainty hanging over Russian flows, India has not given its refiners instructions to stop buying the nation’s shipments, according to people familiar with the matter.
Still, US President Donald Trump earlier blasted New Delhi for the energy purchases and threatened so-called secondary sanctions that could take effect from Aug 8. US special envoy Steve Witkoff may head to Russia this week.
Ukraine’s military at the weekend claimed strikes on two refineries and other infrastructure in Russia in what it said was a response to deadly attacks by Kremlin forces on Ukrainian cities. The Novokuibyshevsk plant in the Samara region and the Ryazan refinery were hit, the Ukrainian General Staff said. BLOOMBERG
