Oil prices dip on oversupply fears as summer demand winds down

Oil prices edged lower in early Asian trading on Thursday, retracing some of the previous session’s gains as concerns over oversupply resurfaced and traders prepared for the end of the U.S. summer driving season.

West Texas Intermediate (WTI) slipped 39 cents, or 0.61%, to $63.76 a barrel, while Brent crude lost 41 cents, or 0.6%, to $67.64. The decline followed a more than 1% rise on Wednesday, though both benchmarks remain on track for their steepest monthly drop since April.

Fresh data from the U.S. Energy Information Administration (EIA) painted a mixed picture of the domestic market. Nationwide crude inventories fell by 2.4 million barrels last week, more than the 1.9 million-barrel draw analysts expected. Stockpiles at Cushing, Oklahoma — the delivery hub for U.S. crude futures — declined for the first time in eight weeks, underscoring solid demand ahead of the Labor Day holiday, the final peak of the summer travel season.

Still, refinery throughput slipped to its lowest level since early July, raising doubts about whether drawdowns can be sustained once seasonal demand fades in September and beyond.

Geopolitical risks added another layer of uncertainty. Washington this week doubled tariffs on Indian goods to 50%, pressuring New Delhi to halt imports of Russian oil. White House adviser Peter Navarro argued that India is helping prolong the Ukraine war by providing Moscow with revenue. However, analysts expect India to continue purchasing Russian crude in the near term, limiting the tariffs’ immediate impact on global supply.

The U.S.–India tensions come as OPEC+ increases output and non-OPEC producers add supply, amplifying oversupply worries. Meanwhile, the war in Ukraine continues to roil energy markets: Kyiv reported a massive overnight drone attack on gas and power infrastructure, leaving over 100,000 people without electricity. Such incidents have lent some support to oil prices by highlighting Europe’s fragile energy security.

Beyond energy-specific drivers, broader market sentiment weighed on crude. Asian equities opened lower Thursday after U.S. chipmaker Nvidia disappointed investors with its latest earnings, fueling a risk-off mood that spilled into commodities.

On the policy front, traders are also watching the U.S. Federal Reserve. New York Fed President John Williams said interest rates will eventually come down but stressed the need for more data before a possible cut at the September 16–17 meeting. Any easing in borrowing costs would likely bolster economic growth and, by extension, oil demand.

For now, crude futures remain caught between opposing forces: strong U.S. inventory draws and potential Fed rate cuts on one side, and looming seasonal demand weakness, rising supply, and geopolitical frictions on the other. The market appears to be in a holding pattern, with prices drifting lower as traders await clearer signals heading into September.