Oil Prices Slip as Oversupply Concerns Outweigh Sanctions Risks
Oil prices fell in Asian trading on Tuesday, as worries about a growing global oversupply offset optimism over progress to end the U.S. government shutdown and uncertainty around new sanctions on Russian oil companies.
By 07:17 GMT, Brent crude futures dropped 27 cents, or 0.4%, to $63.79 per barrel, while U.S. West Texas Intermediate (WTI) fell 27 cents, or 0.5%, to $59.86 per barrel. Both benchmarks had gained roughly 40 cents in the previous session.
Shutdown Progress Fails to Lift Oil Prices
The U.S. Senate approved a funding compromise that could end the longest government shutdown in U.S. history, potentially reopening the government this week. The bill now moves to the House of Representatives, where Speaker Mike Johnson indicated a quick approval could come as soon as Wednesday.
While the progress helped boost broader financial markets, crude prices struggled to maintain momentum as oversupply fears continued to dominate sentiment.
OPEC+ Output Growth Fuels Oversupply Worries
Analysts at Ritterbusch and Associates said in a note that increasing OPEC production is creating a more bearish outlook for oil, especially as demand trends lower amid slower global economic growth.
“Ongoing OPEC output hikes are putting pressure on global balances,” the analysts wrote, noting that weak demand among major oil-consuming countries is compounding the problem.
Earlier this month, OPEC+ agreed to increase December output targets by 137,000 barrels per day, matching the hikes from October and November. The group also decided to pause production increases in the first quarter of next year.
Sanctions on Russian Oil Majors Add Market Uncertainty
Despite oversupply dominating the market narrative, traders remained focused on U.S. sanctions targeting Rosneft and Lukoil, two of Russia’s largest oil producers. The measures, initiated by President Donald Trump, have disrupted parts of Russia’s energy operations and exports.
According to Reuters, Lukoil declared force majeure at Iraq’s West Qurna-2 oil field, marking one of the most significant impacts of the sanctions so far. Bulgaria is also reportedly preparing to seize Lukoil’s Burgas refinery, signaling wider European consequences.
Meanwhile, the volume of oil stored on ships in Asian waters has nearly doubled in recent weeks, as stricter Western sanctions and reduced import quotas in China and India limited buying activity. Many refiners in the region have shifted to sourcing crude from Middle Eastern suppliers instead.
Analysts warned that future demand trends will depend on China’s strategic stockpiling decisions and whether India heeds U.S. requests to curb Russian oil imports.
