Oil prices declined in Asian trading on Wednesday, affected by concerns over increasing OPEC+ output and tariff tensions that threaten the global economic outlook, even as worries regarding Canadian supply provided some support.
Brent crude futures fell 23 cents, or 0.4 percent, to $65.40 a barrel by 03:18 GMT (currently trading above $65.35), while U.S. West Texas Intermediate crude decreased by 25 cents, or 0.4 percent, to $63.16 a barrel (currently trading above $63.10). Both benchmarks had risen approximately 2 percent on Tuesday to reach a two-week high, driven by fears of supply disruptions from Canadian wildfires and expectations that Iran would reject a U.S. nuclear deal proposal critical to easing sanctions on the major oil producer.
“Despite fears over Canadian supply and stalled Iran-U.S. nuclear talks, oil markets are struggling to extend gains,” Reuters reported, citing Tsuyoshi Ueno, a senior economist at NLI Research Institute. He added that the OPEC+ increases were limiting the upside potential.
Ueno noted that hopes for progress in U.S.-China trade discussions were overshadowed by profit-taking, as investors remained cautious about the broader economic repercussions from tariffs. U.S. President Donald Trump and Chinese leader Xi Jinping are expected to speak this week, according to White House Press Secretary Karoline Leavitt, following Trump’s accusations that China violated a deal to roll back tariffs and trade restrictions.
Read more: Crude oil prices rise above $64.85 driven by OPEC+ decision, supply fears
OECD lowers growth forecast
On Tuesday, the Organisation for Economic Co-operation and Development (OECD) revised down its global growth forecast as the consequences of Trump’s trade war increasingly impact the U.S. economy. Moreover, analysts were assessing the effects of OPEC+ increases and the situation regarding Canadian wildfires on supply.
Markets still anticipated that the wildfires that have affected Canada since May would disrupt supply, despite a temporary respite from wet weather. “However, this relief could be short-lived amid forecasts for drier and warmer weather towards the end of this week,” Reuters reported, citing analysts from ING.
Some analysts predict that the loss of Canadian supply will more than offset half of the increases planned by OPEC+ for next month. “Estimates suggest around 350,000 barrels per day have been affected and shut in,” stated SEB analyst Ole Hvalbye, referring to the impact of the wildfires. “To put this in context, the disruption exceeds three-quarters of the volume OPEC+ agreed to add to the market in July.”
