Oil reversed losses after Ukrainian President Volodymyr Zelenskiy said his country would retaliate if Russia continues to block Ukrainian ports.

Zelenskiy’s warning triggered fresh buying in the futures market as traders weighed the possibility of supply disruptions. Oil had advanced to the highest since April early in Monday’s trading, with the U.S. crude benchmark erasing year-to-date losses after the Organization of Petroleum Exporting Countries and its allies cut production. On Tuesday, cartel leader Saudi Arabia reaffirmed its commitment to voluntarily curb supplies next month. 

Still, a weakening demand outlook is weighing on the market. The U.S. Energy Information Administration on Tuesday lowered its forecast for U.S. consumption. Reports from OPEC and the International Agency coming later this week will offer further updates on the health of the market.

Adding to bearish pressures, China’s trade plunged in July as slowing global demand clouded the outlook for exports, while the nation’s oil imports slipped to a six-month low. The dollar climbed and stocks fell as a ratings downgrade for 10 small- and midsized-U.S. lenders exacerbated worries of renewed banking tumult.

Away from headline prices, Brent crude has weakened markedly versus other oil benchmarks in recent days. It’s now trading at a rare discount to Middle Eastern Dubai crude as OPEC+ output cuts lift the cost of heavier supplies, while its premium to WTI also has contracted to around the smallest since May.

Prices:

• WTI for September delivery fell 0.8 per cent to US$82.59 a barrel at 1:55 p.m. in New York.
• Brent for October settlement dipped 0.7 per cent to $85.92 a barrel.