HOUSTON: Oil prices slipped around USD1 a barrel on Tuesday and were on track for a third straight day of declines as investors considered the impact of US sanctions against Russia’s two biggest oil companies on global supply, along with a potential OPEC+ plan to raise output.
Brent crude futures were down USD1.09, or 1.7 percent, to USD64percent 3 a barrel at 10:44 a.m. EDT (1444 GMT). US West Texas Intermediate crude futures were down USD1.03, or 1.7percent, at USD60.28. Brent and WTI last week registered their biggest weekly gains since June, reacting to US President Donald Trump’s decision to impose Ukraine-related sanctions on Russia for the first time in his second term, targeting oil companies Lukoil and Rosneft.
“There is skepticism in the market that the Russia sanctions will be as strict as we had initially thought. We definitely saw some risk-off (trading) today,” said Phil Flynn, senior analyst with Price Futures Group. The effect of sanctions on oil-exporting countries will be limited because of surplus capacity, International Energy Agency executive director Fatih Birol said on Tuesday.
Following the US sanctions, Russia’s second-largest oil producer, Lukoil, said on Monday it would sell its international assets.
This is the most consequential action so far by a Russian company in the wake of Western sanctions over Russia’s full-scale war in Ukraine, which started in February 2022. Moscow-headquartered Lukoil accounts for around 2 percent of global oil output.
Indian refiners have not placed new orders for Russian oil purchases since sanctions were imposed, as they await clarity from the government and suppliers, sources told Reuters on Tuesday. OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies including Russia, is leaning toward another modest output boost in December, four sources familiar with the talks told Reuters. Having curbed production for several years to support the oil market, the group started reversing those cuts in April.
“This raises the larger question as to how much spare capacity OPEC+ really has left,” Flynn said. The CEO of Saudi state oil company Aramco said on Tuesday crude oil demand was strong even before sanctions were imposed on Rosneft and Lukoil, and that Chinese demand was still healthy.
Investors will watch the prospect of a trade deal between the US and China, the world’s two biggest oil consumers, with Trump and President Xi Jinping due to meet on Thursday in South Korea. Beijing hopes Washington can meet it halfway to “prepare for high-level interactions” between the two countries, Foreign Minister Wang Yi told US Secretary of State Marco Rubio in a phone call on Monday.
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