Oil Prices Fall for Three Days as Market Reassesses Supply-Demand Balance
On Tuesday, international oil prices declined again, continuing the previous correction trend. Brent crude futures settled down 1.9%, at $64.40 per barrel; US WTI crude futures also dropped 1.9%, closing at $60.15 per barrel. After posting the biggest weekly gain since June last week, market sentiment quickly reversed as investors began reassessing the combined impact of US sanctions on Russian oil and OPEC+ production increase expectations.
Analysts pointed out that this round of decline mainly stems from traders worrying that the enforcement of US sanctions may be weaker than expected, while potential OPEC+ production increase news has exacerbated concerns about oversupply, hindering the oil price rally.
Sanction Effectiveness Questioned, Supply Concerns Temporarily Eased
Last week, US President Trump announced sanctions on Russia due to the Ukraine situation, targeting companies such as Lukoil and Rosneft. Following the announcement, oil prices surged in the short term, as markets feared restricted Russian exports would tighten global supply.
However, latest reports show the US government has provided written assurances to Germany, confirming that Russian oil business in Germany will not be affected by sanctions. Analysts believe this indicates that sanctions are flexible, and the anticipated supply shock might be significantly mitigated.
Phil Flynn, a senior analyst at Price Futures Group, stated: "The exemption given to Germany by Trump makes the market realize that these sanctions are not absolute but rather a negotiating tool. Investors are repricing risks, which explains the oil price correction logic."
Additionally, Fatih Birol, Executive Director of the International Energy Agency, noted that there is still sufficient spare capacity globally to cushion against potential supply disruptions. He stated: "The sanctions will have limited short-term impacts on the global market; the key remains the subsequent production decisions of OPEC+."
OPEC+ Might Increase Production in December, Market Reacts Cautiously
Several informed sources revealed that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, are inclined to slightly increase production at the December meeting. The alliance has implemented production cuts in recent years to stabilize oil prices, but as economic recovery progresses and inventories rise, some member countries advocate gradually relaxing restrictions.
Andrew Lipow, president of Lipow Oil Associates, noted that if OPEC+ decides to expand production, it may offset the supply reduction brought about by US sanctions, maintaining market supply-demand balance. He emphasized: "The oil market is in a delicate rebalancing phase, and any production adjustment could significantly impact prices."
Industry insiders generally believe that the upcoming OPEC+ meeting will face a dilemma: on one hand, they wish to maintain price stability to support member countries' fiscal revenues; on the other, they need to avoid high oil prices suppressing demand and accelerating alternative energy investments.
India Pauses Purchases, Demand Side Remains Observant
Under the shadow of sanctions, Indian refiners have not yet made new orders for Russian crude. Sources said the Indian government and major energy importers are waiting for further policy guidance to assess compliance and settlement risks. This pause may temporarily drag on Russian crude exports, but it also reflects market uncertainty about future policies.
Analysts pointed out that if India continues to observe, Russia might turn to other Asian markets to seek export channels, which could further disrupt regional energy flows.
Volatility May Persist, Focus on Policy Signals
Although short-term oil prices are under pressure, some institutions believe that the medium-to-long-term trend still depends on the macroeconomic trajectory and energy policy direction. If OPEC+ production increases are limited and global demand remains robust, oil prices may stabilize again in the second half of the year.
Energy consultancy firm Energy Aspects stated in a report: "In the coming weeks, oil price volatility may rise. The market needs clearer supply-demand guidance—whether from US-Russia relations, OPEC+ meetings, or global economic recovery data."
Currently, investors generally maintain a cautious stance, waiting for the final decision of the December OPEC+ meeting. Analysts believe that only when the policy direction becomes clear can oil prices escape short-term volatility and find a new stable range.
