Crude oil prices on Tuesday fell on the possibility of progress at the Trump-Putin summit in Alaska on Friday regarding the Russia-Ukraine war, which could result in reduced sanctions on Russian oil. The oil markets also remain concerned about an oil surplus after the EIA on Tuesday raised its forecast for the 2025 global oil surplus to 1.7 million bpd from 1.1 million bpd. The EIA expects a global oil surplus of 1.5 million bpd in 2026, up from its previous forecast of 1.1 million bpd.
Bullish factors Tuesday included the slightly lower dollar and President Trump’s 90-day postponement of the higher tariffs on China, which was a supportive factor for global economic growth and energy demand.
In a bullish longer-term factor, the EIA on Tuesday forecasted that US oil production in 2026 will fall to 13.28 million bpd, which would be the first annual drop since 2021. US shale companies are reducing their drilling and production plans due to low crude oil prices. The number of active US oil rigs recently fell to a 3.75-year low of 410 rigs.
Crude has support after President Trump recently said that he would impose new tariffs on countries buying Russian energy unless Russia reaches a ceasefire with Ukraine. Last Wednesday, President Trump doubled tariffs on Indian exports to 50% from 25% because of India’s purchases of Russian crude. JPMorgan Chase warned that if enforced, oil markets would be unable to ignore the impact of triple-digit tariffs on Russian oil, given the significant scale of Russian exports and limited OPEC spare capacity, which could potentially lead to a supply shock.
Concerns about a global oil supply glut are weighing on crude prices after OPEC+ on August 2 endorsed an additional 547,000 bpd increase in its crude production for September 1. OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026. OPEC+ has 1.66 million bpd of supplies that are currently due to remain offline until late 2026. The International Energy Agency has said the global crude oil market faces a surplus by Q4-2025 equivalent to 1.5% of global crude consumption. OPEC July crude production fell -20,000 bpd to 28.31 million bpd.
Credit: Yahoonews.com
