Oil weakens as Putin, Modi huddle in China after US tariff

Oil declined following a monthly drop in August, with traders focused on concerns over a potential glut and signals over Russian supply.

Brent fell toward $67 a barrel, while West Texas Intermediate was below $64.

With Washington seeking to force India to halt imports of Russian oil by ratcheting up secondary tariffs, Indian Prime Minister Narendra Modi met with Vladimir Putin at a regional summit in China.

In social-media comments, Modi said it was “always a delight” to meet with the Russian president.

Heading into the meeting, New Delhi has defended its ties with Russia, calling Washington’s actions “unfair, unjustified and unreasonable.”

At the same time, local refiners have not stopped taking Moscow’s crude, although there have been some opportunistic purchases of cargoes from the US.

The global oil benchmark has shed about 10% this year, hurt by a deluge of additional supply from OPEC+, as well as concerns the US-led trade war will crimp energy demand.

The producer group, which includes Russia, is scheduled to hold a virtual meeting on Sept. 7 to discuss its next move, with the International Energy Agency forecasting the market faces a record glut next year.

“Attention now is on the upcoming OPEC+ meeting, where discussions will focus on the potential restoration of the remaining 1.65 million barrels a day of voluntary production cuts.” said Gao Mingyu, chief energy analyst at SDIC Essence Futures Co. “After the peak season is over, the pressure of oversupply in the oil market will become more pronounced.”

In the US, hedge funds winnowed their bullish position on US crude to the lowest in about 18 years as uncertainty over economic policy compounded growing concerns about oversupply.

The US measures against India are part of a wider drive to broker an end to the war in Ukraine, although Washington hasn’t targeted China with similar moves.

At the weekend, White House trade adviser Peter Navarro kept up the pressure, telling Fox News Sunday that New Delhi was fueling “the Russian war machine” and “nothing but a laundromat” for the Kremlin.

“If there are no further geopolitical disruptions, downward pressure on prices will increase,” said Gao.   (Bloomberg)