Oil Prices Fall on Supply Glut Expectations, Tariffs Tension
Oil prices fell on Monday as OPEC+ increased output more than anticipated in August, catching markets off guard. Concerns about U.S. tariffs and their potential effects on worldwide economic growth also dampened demand outlooks.
At the weekend, OPEC+ alliance announced a larger-than-anticipated production increase for August, while the US heightened trade tensions with a fresh warning of tariff hikes by July 9.
Brent crude fell by 0.4%, trading at $67.67 per barrel. The US benchmark West Texas Intermediate (WTI) decreased by about 0.2%, settling at $65.48 per barrel, compared to $65.65 in the prior session.
The producer alliance—comprising OPEC and its allies—said Saturday it would raise August output by 548,000 barrels per day (bpd), significantly above the monthly hikes of 411,000 barrels approved for May through July, and April’s 138,000-barrel rise.
The decision fueled concerns about a potential supply glut. Analysts view the move as signaling intensified competition for market share and a willingness to accept softer prices and revenue declines.
The increase would effectively reverse about 80% of the 2.2 million bpd in voluntary output cuts introduced by eight OPEC members. However, much of the recent supply growth has come from Saudi Arabia, as others have struggled to meet their quotas.
In a separate bullish signal, Saudi Arabia raised the official selling price for its Arab Light crude to Asia for August—the highest in four months—indicating confidence in regional demand.
Goldman analysts expect OPEC to announce a final increase of 550,000 barrels per day in September at the next meeting on August 3.
Adding to the bearish sentiment, investor anxiety mounted over US tariff policy and its implications for global economic growth. US officials said tariff changes would be delayed but offered no clear timeline or details.
US President Donald Trump said multiple trade agreements were nearing completion and warned that countries would be notified of new, higher tariffs by July 9. The new rates are expected to take effect on August 1.
In April, Trump introduced a 10% baseline tariff on most imports, with the potential for rates as high as 50% under a “reciprocity” framework. He later added to the uncertainty, suggesting tariffs could range anywhere from 10% to 70%.
Analysts say trade tensions will remain a dominant theme through the second half of 2025. For now, the only factor offering oil prices any support is a weaker US dollar. Oil also came under pressure as US officials reported a delay in the introduction of tariffs but provided no details on the change.
The US is close to finalizing several trade deals in the coming days and will notify other countries of higher tariff rates by July 9, President Donald Trump said on Sunday, with higher rates to take effect on August 1.
In April, Trump announced a baseline tariff rate of 10% for most countries and higher “reciprocal” tariffs in the range of up to 50%, with an initial deadline of this Wednesday. However, Trump also said that tariffs could vary in magnitude from “maybe 60% or 70% tariffs to 10% and 20%,” further clouding the picture.
“Fears about Trump’s tariffs continue to be a common theme in the second half of 2025, with dollar weakness being the only support for oil right now,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. US Companies Sign Major Trade Deals with Africa in Shift from Aid to Investment
