Oil prices fall as Opec+ to proceed with output rise

Reuters

• Halt of US aid to Ukraine adds pressure
• Trump tariffs also likely to affect prices
• Doubts over Russian oil flows

Oil prices continued to fall on Tuesday after reports that Opec+ will proceed with a planned output increase in April and markets braced for US tariffs on Canada, Mexico and China to take effect.

Brent futures fell 49 cents, or 0.7 percent, to $71.13 a barrel at 04:55 GMT, as US West Texas Intermediate crude dropped 26 cents, or 0.4 percent, to $68.11.

“The current downward trend in oil prices is primarily driven by Opec+’s decision to increase output and the introduction of US tariffs,” said Darren Lim, commodities strategist at Phillip Nova.

A further complicating factor was geopolitical developments related to the Russia-Ukraine conflict, Lim said.

US President Donald Trump’s pause in all US military aid to Ukraine came after his Oval Office clash with Ukraine’s president, Volodymyr Zelenskyy, last week.

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The Organisation of the Petroleum Exporting Countries (Opec) and allies such as Russia, known as Opec+, decided to proceed with a planned April oil output increase of 138,000 barrels per day, the group’s first since 2022.

“While this decision aims to gradually unwind previous output cuts, it has raised concerns about a potential oversupply in the market,” Lim said

Trump’s 25 percent tariffs on imports from Canada and Mexico were due to take effect early on Tuesday, with 10 percent  tariffs for Canadian energy, while imports on Chinese goods will increase to 20 percent  from 10 percent .

Analysts expect the tariffs to weigh on economic activity and fuel demand, putting downward pressure on oil prices.

BMI analysts wrote in a note: “Market participants are struggling to gauge the impact of the flood of energy-related policy announcements made by the Trump administration this month.

“However, those weighing to the downside, notably US tariff measures, are currently winning out.”

A further pressure on the price of oil was Trump’s halt of military aid to Ukraine, as the market has viewed the growing distance between the White House and Ukraine as a sign of a potential easing of the conflict.

That in turn could lead to sanctions relief for Russia, with more oil supply returning to the market.

The pause came after a Reuters report that the White House has asked the State and Treasury departments to draft a list of sanctions that could be eased for US officials to discuss during talks with Moscow, sources have said.

However, Goldman Sachs analysts say Russia’s oil flows are constrained more by its Opec+ production target than sanctions, warning that an easing might not boost them significantly.