Tariff warnings and supply increases unsettle energy markets
Oil prices dipped on Monday as investors weighed fresh supply news from OPEC+ alongside geopolitical tensions sparked by U.S. President Donald Trump’s threats to penalize India for continuing to import Russian crude. West Texas Intermediate crude hovered near $66 per barrel after sliding to its lowest level in a week.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced an additional output hike of 547,000 barrels per day for the upcoming month. This increase effectively reverses a cut implemented in 2023 by eight member states, including Saudi Arabia and Russia, and has raised concerns of a supply glut.
Trump targets India over Russian oil ties
The renewed price volatility followed President Trump’s escalation of rhetoric toward India, threatening tariffs in response to its ongoing energy trade with Russia. Indian Prime Minister Narendra Modi responded defiantly, signaling no intention to halt purchases from Moscow. Although recent refinery slowdowns in India hinted at pressure from Washington, Modi’s statement dampened market hopes of reduced demand from Asia’s third-largest economy.
U.S. Special Envoy Steve Witkoff is reportedly preparing a visit to Russia, a move that some see as a potential step toward negotiations. Still, analysts caution that Trump’s unpredictable strategy often includes aggressive threats that later fade without follow-through. Market analyst Pavel Molchanov noted that any significant disruption of Russian oil exports would require extreme measures such as a naval blockade, which remains unlikely.
Market outlook remains fragile
The oil market has been on a three-month rally, buoyed by strong demand expectations and limited supply from key regions. However, Friday’s disappointing U.S. jobs report, coupled with a broader slowdown in global economic activity, reignited fears of declining demand.
Though global stockpiles increased earlier this year, the buildup has been concentrated in China, leaving key trading hubs relatively tight. Analysts warn that the combination of softening demand and rising supply could put downward pressure on prices heading into the end of 2025.
OPEC+ supply policy fuels uncertainty
The September output increase by OPEC+ is seen as a strategic move to reclaim market share. Still, it’s unclear whether the group will continue this trend or pause production changes amid fragile market conditions. If current projections hold, supply may soon outstrip demand, leading to increased inventories, narrower price spreads, and a potential market correction.
Energy markets are now watching for signs of a ceasefire agreement involving Russia and the West, further tariff developments, and whether India will revise its energy strategy under pressure from Washington. Until then, volatility is likely to persist.