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Oil prices fall as OPEC+ increases output in September

The oil price fell to its lowest level in a week after OPEC+ agreed on a large increase in production in September. However, traders remained cautious about further sanctions against Russia.

Brent crude futures dropped $1.17 or 1.7% to $68.50 per barrel at 1127 GMT. U.S. West Texas Intermediate Crude fell $1.26 or 1.9% to $66.07 Both contracts fell by about $2 each on Friday.

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

The latest in an accelerated series of output increases to capture market share was in line and early with the market's expectations. It marks a complete and early reversal and the largest tranche of production cuts by the group, which amounts to around 2.5 million bpd or 2.4% of global consumption.

The OPEC+ decision has put pressure on oil prices, according to PVM analyst Tamas Variga. He added that discussions about removing a further 1,65 million bpd in cuts have also contributed to this downward price pressure.

Goldman Sachs analysts expect the actual increase in the supply of the eight OPEC+ nations that have increased output since March to be 1.7 millions bpd, because other members have reduced output after overproducing.

Investors continue to assess the impact of U.S. trade tariffs on dozens of trading partner countries and are wary of any further U.S. sanction against Russia.

U.S. president Trump has threatened to impose secondary tariffs of 100% on Russian crude purchasers in an effort to pressurize Moscow to end its war with Ukraine.

In the medium-term, oil prices are likely to be determined by geopolitics and tariffs. Varga, from PVM, said that any price spike triggered by energy sanction is likely to be temporary.

Trade sources reported on Friday that at least two ships loaded with Russian crude oil bound for refiners located in India had diverted to another destination after the new U.S. Sanctions.

ING analysts have written that Indian refiners will lose 1.7 million bpd if they stop buying Russian crude.

Two Indian government sources said on Saturday that India will continue to buy oil from Russia, despite Trump’s threats. Reporting by Enes Tunagur and Florence Tan Editing Emelia Sithole Matarise and David Goodman

(source: Reuters)