Multiple pressures push oil prices down amid tariff threats and concerns of oversupply
Oil prices fell during trading on Monday, September 1, affected by investors' fears of the risks of increased global supply and the potential repercussions of U.S. tariffs on demand, despite disruptions in supply flows due to the military escalation between Russia and Ukraine.
Brent crude fell by 0.4% to $67.18 per barrel, while West Texas Intermediate crude also dropped by 0.4% to $63.73 per barrel. Trading activity is expected to remain quiet due to the bank holiday in the United States.
Part of the uncertainty stems from the military escalation, as Ukrainian President Volodymyr Zelensky vowed on Sunday to "respond by carrying out more strikes deep inside Russia" in retaliation for drone attacks targeting energy facilities. Both countries have intensified their airstrikes in recent weeks, focusing on energy infrastructure in an attempt to disrupt Russian oil exports.
Markets remain concerned about Russian crude flows, as "weekly shipments from ports have fallen to their lowest level in four weeks at 2.72 million barrels per day," according to tracking data cited by analysts at ANZ in a note.
On the other hand, long-term forecasts indicate limited potential gains for prices. A survey conducted by Reuters on Friday showed that "it is unlikely that oil prices will see significant gains above their current levels this year, amid increased production from major producers that enhances the risks of oversupply, alongside the impact of U.S. tariff threats on demand growth."
Adding to these pressures are fluctuating economic data from China, the world's largest crude importer, where an official survey revealed on Sunday a contraction in manufacturing activity for the fifth consecutive month in August, reflecting a decline in industrial production.
In the United States, data shows strength on the production side, as crude oil production reached a new record high in June, "recording an increase of 133,000 barrels per day to reach 13.58 million barrels per day," according to data from the Energy Information Administration.
The market is now awaiting two major events: the first is the OPEC+ alliance meeting on September 7 for clearer indications on production plans, and the second is U.S. labor market data that will provide an important indicator of economic health and affect investors' expectations regarding the likelihood of interest rate cuts.
