Crude Falls Amid Stronger Dollar, Supply Risk Doubts

Oil fell as the dollar strengthened and traders doubted US President Donald Trump’s plan to pressure Moscow would disrupt Russian exports.

West Texas Intermediate slid 0.7% to settle above $66, extending Monday’s losses. Trump told reporters the US will impose a 19% tariff on goods from Indonesia after teasing the deal earlier in the day. The dollar strengthened, making commodities priced in the currency less attractive.

Trump’s plan to pressure Russia into a ceasefire with Ukraine that was released Monday didn’t directly target energy infrastructure, a decision that brought some bears off of the sidelines. The administration intends to impose 100% tariffs on Russia only if the hostilities don’t end with a deal in 50 days, allaying fears of near-term supply tightness.

“Since the start of the Ukraine war, it has become evident that halting Russian oil trade by targeting Russian sellers or the numerous shippers and payment intermediaries is nearly impossible,” JPMorgan Chase & Co. analysts led by Natasha Kaneva wrote in a note.

Prices briefly popped on comments by US Energy Secretary Chris Wright that the US is considering creative ways to refill the Strategic Petroleum Reserve, before resuming their decline.

Futures also came under pressure as investors liquidated their positions in WTI’s so-called prompt spread ahead of the contract expiry. US crude’s prompt spread — the difference between its two nearest contracts — held steady at around $1.16 a barrel in backwardation. While that’s still a bullish pattern, with nearer-term prices above those further out, it’s notably lower than Monday’s peak of $1.49.

The gauge is set to be closely followed as the market’s focus shifts back to supply. The Organization of the Petroleum Exporting Countries partly pushed back against an International Energy Agency report that Saudi Arabia’ crude production surged in June. The cartel’s figures show Riyadh complied with its quota. The kingdom last week said excess production was put in storage and wasn’t delivered to the market.

US crude has lost about 7% this year, hurt by the fallout from Trump’s trade war and a drive by OPEC+ to restore curbed supplies. These headwinds have fanned concern output may run ahead of consumption, creating a glut, although current market metrics point to underlying support.

In Asia, traders assessed a relatively strong showing from crude processors in China, the world’s largest oil importer. Refining throughput rose to more than 15.2 million barrels a day in June, the strongest pace since September 2023, according to Bloomberg calculations based on government figures. A gauge of apparent demand also improved.

Still, “investors appear to be discounting China-related strength, viewing it as front-end loading ahead of potential tariffs rather than a sustainable demand signal,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “The overriding focus for crude remains the expected oversupply in the second half of the year.”