Oil Prices Drop 2% as Russia-Ukraine Tensions Cloud Market
Global oil prices slipped nearly 2% on Tuesday, reversing gains from the previous session when they surged by a similar margin.
The decline comes as investors closely monitor the ongoing war in Ukraine and weigh potential disruptions to Russian fuel exports.
Brent crude dropped $1.28 (1.9%) to $67.52 per barrel on Tuesday morning after reaching its highest level since early August on Monday. U.S. benchmark West Texas Intermediate (WTI) fell by $1.30 (2%) to $63.50.
“Front and centre in this week’s trade is the possibility that U.S. tariffs on India could be doubled to 50% as early as tomorrow in further restricting Russian export flows that are already being inhibited by recent Ukrainian attacks on Russian oil refineries,” analysts at energy advisory firm Ritterbusch and Associates said in a note obtained by Reuters.
India, the third-largest buyer of Russian crude, could soon face U.S. duties of up to 50%, one of the highest rates Washington has imposed in recent years.
The rally in oil prices on Monday was largely fueled by supply concerns following Ukraine’s strikes on Russian energy facilities and fears of additional U.S. sanctions targeting Moscow’s oil exports.
Ukraine’s counterattacks, responding to Russia’s battlefield advances and strikes on Ukrainian gas and power infrastructure, have disrupted Russian refining operations. This disruption has led to gasoline shortages in some regions of Russia.
In response to the refinery damage, Russia has increased its crude oil export plan from western ports by 200,000 barrels per day (bpd) for August, freeing up crude initially intended for domestic processing, according to three sources familiar with the matter.
Meanwhile, U.S. President Donald Trump reiterated his warning of imposing fresh sanctions on Russia if progress toward a peace agreement does not materialise within two weeks. However, sources revealed that American and Russian officials discussed potential energy deals during recent peace negotiations.
“Given the huge amount of uncertainties in the oil market caused by the Ukrainian conflict and the tariff war, investors will remain unwilling to commit themselves to either direction on a prolonged basis,” said PVM Oil Associates analyst Tamas Varga.
He added that Brent prices may remain range-bound between $65 and $74 for the foreseeable future.
