Oil Prices Edge Lower as Rising Supply, US Tariffs Weigh on Outlook

Oil prices slipped on Monday, trading within a narrow range as concerns over rising global supply and the impact of US tariffs on demand offset worries about disruptions caused by escalating Russia-Ukraine hostilities.

Brent crude fell 30 cents, or 0.44 percent, to $67.18 a barrel by 7 a.m. Saudi time, while US West Texas Intermediate (WTI) dropped 28 cents, also 0.44 percent, to $63.73. Analysts said trading volumes were expected to remain muted because of a US bank holiday.

The pullback comes against the backdrop of intensified strikes in the Russia-Ukraine conflict. Ukrainian President Volodymyr Zelensky vowed on Sunday to expand retaliatory attacks after Russian drones targeted power facilities across northern and southern Ukraine. The surge in assaults on energy infrastructure has disrupted oil exports from Russia, with shipments from its ports falling to a four-week low of 2.72 million barrels per day, according to data cited by ANZ analysts.

Despite the dip in exports, traders reported that Russian oil flows to India are set to rise in September, even as Washington imposed secondary tariffs on New Delhi for continuing to buy crude from Moscow. “Prime Minister Modi’s meeting with President Putin in China will be closely watched, particularly in light of US pressures,” said Michael McCarthy, CEO of Moomoo Australia, referring to the Shanghai Cooperation Organization summit later this week.

Market sentiment remains cautious, with a Reuters poll on Friday suggesting oil prices are unlikely to stage a strong recovery this year. Rising output from major producers and slowing demand due to tariff tensions could create a surplus, capping any upward momentum.

Fresh economic data from Asia on Monday also added uncertainty. While factory activity in China showed unexpected growth in August, Japan and South Korea saw weakening performance, underscoring the strain US tariffs are placing on export-dependent economies. Analysts warned that the outlook for Asia’s fragile recovery remains clouded.

Both Brent and WTI crude ended August with their first monthly decline in four months, falling more than 6 percent amid worries over OPEC+ supply policies. Investors are now looking ahead to the oil producers’ group’s September 7 meeting for guidance on output levels.

Meanwhile, US crude production reached a record high in June, climbing by 133,000 barrels per day to 13.58 million bpd, according to Energy Information Administration data released Friday.

Investors will also be watching a key US labor market report this week, which could shape expectations for interest rate cuts. Stronger signs of easing monetary policy may boost appetite for commodities, though the broader oil market remains weighed down by supply risks and trade tensions.