A pipeline carries crude oil at Big Hill near Beaumont, Texas, U.S. (Photo: Joe Raedle/Newsmakers)
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Global oil prices retreated sharply from two-week highs on Tuesday, following demand concerns and talk of further U.S. trade tariffs by President Donald Trump.
Global proxy benchmark – Brent – saw its front-month futures contract close in London at $66.87 per barrel, down 2.11% or $1.46. Stateside, at 13:39pm EDT on Tuesday, the U.S. West Texas Intermediate front-month contract traded 2.27% or $1.47 lower at $63.33 per barrel.
The intraday drop in prices came after crude futures posted gains in the region of 3% following an impasse in talks on ending the Ukraine war between the U.S. and Russia and lower inventory data.
Market chatter on the U.S. Federal Reserve easing its monetary policy stance in favor of a September rate cut was also seen as being supportive of demand.
However, the price uptick was abruptly halted and subsequently reversed on Tuesday after Trump said Russia would face “very heavy” sanctions if it did not make efforts to end the war and opened a direct negotiating channel with Ukraine.
Reports are also emerging that Ukraine may have knocked out a fifth of Russia’s refining capacity via drone attacks, severely curtailing Moscow’s ability to service its war economy.
According to Euronews, Ukraine’s recent strikes on ten Russian oil refineries have reportedly disrupted at least 17% of the country’s total refining capacity. That is an equivalent of 1.1 million barrels per day.
Ukraine’s targeted campaign is focused on refineries, oil depots and military-industrial sites, the pan-European TV network reported. This way Kyiv has disrupted Moscow’s ability to process and export oil, it added.
The Ukrainian campaign has also created shortages, especially of petrol, in some Russian regions as well as Russia-annexed Crimea.
Meanwhile, ongoing U.S. threats to impose steep tariffs on India over its purchases of Russian oil are weighing on oil market sentiment as well.
That is in line with the Trump administration’s initial announcement of a 25% duty on Indian imports under reciprocal trade measures, which was later raised to a rate of 50%. It is set to come into effect from August 27.
While negotiations between Washington and New Delhi are expected to continue, any impact on economic activity in India – the world’s third-largest consumer of crude oil after the U.S. and China – will likely be bearish for the oil market.
New Developments Deepen Old Concerns
A string of new bearish developments have deepened old concerns over demand for crude oil for the remainder of 2025 as well as the first quarter of 2026, with more oil expected on the world’s energy markets.
Not only has the Organization of the Petroleum Exporting Countries signalled its intention to pump more oil, according to the U.S. Energy Information Administration, the nation’s crude production came in at an all-time high of 13.47 million bpd in April, breaking a previous record of 13.45 million bpd set in October 2024.
The ranks of non-OPEC producers are also being boosted by higher output from Brazil, Canada, Guyana and Norway. Collectively, non-OPEC production growth is likely to rise by 1.4 million bpd, according to the International Energy Agency.
Notwithstanding any additional OPEC barrels, such levels of non-OPEC growth alone are more than sufficient to account for global demand growth projections for this year that have been put forward by various forecasters. These range from 0.72 million bpd to 1.3 million bpd, with IEA and OPEC being at the opposite ends of that range.
With additional oil barrels flowing in from all corners, there are fears the oil market may well end up with a surplus of as much as 500,000 to 600,000 bpd, perhaps even more.
Disclaimer: The above commentary is meant to stimulate discussion based on the author’s opinion and analysis offered in a personal capacity. It is not solicitation, recommendation or investment advice to trade oil and natural gas stocks, futures, options or products. Oil and natural gas markets can be highly volatile and opinions in the sector may change instantaneously and without notice.
Source: https://www.forbes.com/sites/gauravsharma/2025/08/26/oil-slumps-by-over-2-on-us-trade-threats-demand-concerns/
