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Oil drifts lower on rising supply, concerns about demand

Oil prices fell on Tuesday due to concerns about oversupply. OPEC+ increased production despite a weak outlook for demand. This more than offset the possibility of a tightening Russian oil trade as a result of U.S. policy.

Brent crude futures fell 11 cents or 0.16% to $68.65 per barrel at 0424 GMT. U.S. West Texas Intermediate Crude was down 12 Cents, or 0.1%, to $66.17 per barrel.

Both contracts fell more than 1% the previous session, settling at their lowest level in a week.

Both benchmarks have declined because the extra capacity of OPEC+ acts as a buffer to any deficiencies in Russian barrels. This is according to Priyanka Sackdeva, a Phillip Nova senior analyst.

The Organization of the Petroleum Exporting Countries (OPEC+) and its allies agreed to increase oil production in September by 547,000 barrels a day.

Analysts caution that the actual amount returned to the market may be lower.

Analysts are concerned about the demand side of things, and some predict a slowdown in economic growth for the second half.

Analysts at JPMorgan said that the risk of an American recession is high, as the labour demand has stagnated. The analysts noted that the July Politburo Meeting in China signaled no further policy easing, with the focus now shifting to structural rebalancing.

Oil prices are now being driven by concerns about possible disruptions in supply, not the weakening of economic fundamentals.

Donald Trump, the U.S. president, has stated that he may impose secondary tariffs of 100% on Russian crude purchasers such as India. This comes after Trump announced a 25% tariff in July on Indian imports.

Trump threatened to increase tariffs again on Monday over Russian oil purchases. New Delhi branded his attack as "unjustified," and pledged to protect its own economic interests. This further exacerbated the trade gap between the two nations.

India is the largest buyer of Russian crude oil by sea. It imported about 1.75 million barrels per day (bpd) from January to June, an increase of 1% compared to a year earlier, according to trade sources.

Analysts fear that the latest U.S. trade tariffs could dampen demand for fuel and slow down economic growth. (Reporting from Anjana Anil, Bengaluru; Siyi Liu, Singapore; editing by Christian Schmollinger & Jamie Freed).

(source: Reuters)