Oil prices remained steady on Tuesday, reflecting a complex balancing act as global markets assessed signals from both OPEC+ on future supply and the potential for additional US sanctions on Russia. The West Texas Intermediate (WTI) traded above $61 per barrel, while Brent crude closed near $64 in the previous session, signalling cautious sentiment among traders and analysts.

OPEC+ Committees to Influence July Output Strategy

The focus is currently on an upcoming OPEC+ committee meeting, scheduled for Wednesday, followed by a more significant gathering on Saturday where Saudi Arabia and its allies will make a decision on production policy for July. These meetings are critical as OPEC+ continues to gradually reintroduce idled supply into the global oil market.

Since mid-January, oil prices have been on a declining trajectory, largely due to the group's effort to ease earlier supply cuts. Analysts believe that the decisions from the upcoming meetings will have a direct impact on price direction, particularly if a substantial output increase is confirmed.

Rising Tensions: US May Sanction Russia Again

Geopolitical tensions are intensifying, with the United States considering fresh sanctions on Russia. This follows a social media post from President Donald Trump, who warned that Russian President Vladimir Putin was "playing with fire". The remark has stirred speculation that Washington may escalate its measures against Moscow, particularly targeting its energy exports.

Such sanctions could disrupt Russian oil flows, which are a significant component of the global energy supply chain. Any disruption in Russian exports could create a short-term bullish push for oil prices, depending on the scale and scope of the sanctions.

Market Jitters Amid Trade War Concerns

Adding to the uncertainty is the ongoing trade dispute between the United States and several global economies. The Trump administration has introduced widespread tariffs, leading to retaliatory measures from countries like China, the EU, and others. This trade environment has contributed to market instability, stoking fears of a global economic slowdown.

A slowdown would naturally translate to lower energy demand, which could counteract any price support from supply constraints. Investors are treading cautiously, watching both diplomatic developments and macroeconomic indicators.

Crude Price Trends: WTI and Brent

• WTI crude oil, the US benchmark, was trading above $61 a barrel, showing resilience despite downward pressure.

• Brent crude, the global benchmark, hovered close to $64, a level that suggests investors are waiting for clear signals from OPEC+.

These levels indicate a fragile equilibrium, where expectations of supply increases are weighed against geopolitical risk.

Demand Outlook Still Uncertain

Even though global economies are slowly recovering post-pandemic, the pace of demand growth remains uneven. Key consuming nations like China and India are navigating mixed economic signals. On the other hand, European economies are slowly regaining momentum, contributing positively to global demand forecasts.

However, if the trade wars continue and interest rates rise in response to inflation, energy consumption may not rise as quickly as expected, keeping oil prices under pressure.

Strategic Moves from Saudi Arabia and Allies

Saudi Arabia, which leads the OPEC bloc, is expected to push for a measured increase in output, attempting to balance market share and price stability. While some OPEC+ members favour a more aggressive increase in production, others are cautious, fearing another sharp fall in prices if demand doesn't match supply.

The final decision from the OPEC+ Saturday meeting will be a critical moment for the energy markets, especially in light of the US-Russia tensions and economic uncertainties stemming from the trade war.

Conclusion: Caution Ahead for Energy Markets

In summary, the oil market is at a crossroads:

• On one side, production increases by OPEC+ could flood the market with more supply, putting downward pressure on prices.

• On the other side, potential US sanctions on Russia may curb global supply, offering a bullish counterbalance.

• Meanwhile, trade tensions and fears of a global slowdown are acting as an overhang on demand recovery.

Investors, traders, and policymakers are closely watching this space, and any major development over the next few days — whether from OPEC+, the White House, or trade war developments — could significantly impact oil prices.

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