Oil prices fell on Tuesday as investors interpreted OPEC+’s decision to halt production increases in the first quarter as a signal of oversupply.
Brent crude futures fell 15 cents, or 0.2%, to $64.74 per barrel by 04:05 GMT. WTI Crude fell 14 cents, or 0.2%, to $60.91 per barrel.
On Sunday, OPEC+ agreed to a small oil production increase for December and a pause in increases in the first quarter of next year.
OPEC+ has raised its production targets by about 2.9 million barrels per day (bpd) since April—about 2.7% of global supply—but has slowed production and even halted the replanning in the first quarter of the new year due to oversupply projections.
The market sees this as the first sign that OPEC+ is acknowledging a potential oversupply situation. OPEC+ has so far been quite optimistic about demand trends and the market’s ability to absorb the extra barrels.
However, on Monday, bosses of some of Europe’s largest energy producers disputed forecasts of an oil oversupply next year, citing rising demand and declining production.
Some sources attributed OPEC+’s decision to keep production targets unchanged to Russia lobbying for a pause, claiming it would struggle to increase exports due to Western sanctions.
In October, both the US and the UK imposed sanctions on two of Russia’s major oil companies, Rosneft and Lukoil.
Meanwhile, oil strategists maintain that while the risk of disruption has increased, the US measures, along with complementary actions from the UK and the EU, will not hinder Russian oil producers’ operations.
Despite the current decline in oil prices, sanctions will likely continue to provide some support to prices in the near term.
Market participants are awaiting the latest U.S. inventory data from the American Petroleum Institute (API), due later in the day, for further trading clues. A preliminary survey showed that U.S. crude oil inventories were expected to rise last week.