Oil prices dip after hitting three-week high on Russian supply concerns

Oil prices fell by about 2 per cent on Tuesday a day after surging nearly 2 per cent, as investors watched developments in the war in Ukraine and assessed potential disruption to Russian fuel supplies.

Brent crude was down $1.28, or 1.9 per cent, at $67.52 a barrel by 11:19 a.m. EDT, a day after hitting its highest since early August. West Texas Intermediate (WTI) crude lost $1.30, or about 2 per cent, to $63.50.

"Front and center in this week's trade is the possibility that US tariffs on India could be doubled to 50 per cent as early as tomorrow in further restricting Russian export flows that are already being inhibited by recent Ukrainian attacks on Russian oil refineries," analysts at energy advisory firm Ritterbusch and Associates said in a note.

India is the third-largest buyer of Russian crude. Indian exports could face US duties of up to 50 per cent - among the highest imposed by Washington.

Oil's rally on Monday was primarily driven by supply risks after Ukraine strikes on Russian energy infrastructure and the possibility of further US sanctions on Russian oil.

Ukraine's attacks in response to Russia's advances in the conflict and its pounding of Ukrainian gas and power facilities have disrupted Moscow's oil processing and exports and created gasoline shortages in some parts of Russia.

Russia has revised up its crude oil export plan from western ports by 200,000 barrels per day (bpd) in August from the initial schedule after Ukrainian drone attacks disrupted refinery operations and freed up more crude for shipment, three people familiar with the matter said.

US President Donald Trump, meanwhile, has renewed his threat to impose sanctions on Russia if there is no progress towards a peace deal in the next two weeks.

However, sources have told Reuters that US and Russian government officials discussed several energy deals on the sidelines of this month's negotiations seeking peace in Ukraine.

"Given the huge amount of uncertainties in the oil market caused by the Ukrainian conflict and the tariff war, investors will remain unwilling to commit themselves to either direction on a prolonged basis," said PVM Oil Associates analyst Tamas Varga.

In the medium term, Brent prices could be bound to a trading range of $65-$74 for the foreseeable future, he added.