Oil prices declined on Tuesday, continuing the downward trend from the preceding two sessions, as OPEC’s plans to increase output countered the optimism surrounding a possible U.S.-China trade agreement. Brent crude futures experienced a decline of 4 cents, settling at $65.58 per barrel as of 0106. U.S. West Texas Intermediate crude futures experienced a decline of 9 cents, settling at $61.22. Analyst noted in a morning report that traders assessed advancements in U.S.-China trade discussions alongside the overall supply outlook.

OPEC+, comprising the Organization of Petroleum Exporting Countries and its allies, including Russia, is reportedly inclined to implement a modest increase in output come December, according to four sources familiar with the discussions. This decision is expected to act as a headwind for prices. After several years of curtailing production to bolster the oil market, the group commenced the reversal of those cuts in April.

The potential for a trade agreement between the United States and China, the leading oil consumers globally, bolsters market sentiment, as Presidents Donald Trump and Xi Jinping are scheduled to convene on Thursday in South Korea. Beijing expresses a desire for Washington to engage in a collaborative effort to “prepare for high-level interactions” between the two nations, as articulated by Foreign Minister Wang Yi during a phone conversation with U.S. Secretary of State Marco Rubio on Monday. Last week, Brent and WTI experienced their most significant weekly increases since June, following Trump’s imposition of Ukraine-related sanctions on Russia for the first time during his second term, specifically aimed at oil companies Lukoil and Rosneft.

In the wake of the sanctions, Lukoil, Russia’s second-largest oil producer, announced on Monday its intention to divest its international assets. This represents the most significant move to date by a Russian firm in response to Western sanctions imposed due to Russia’s ongoing conflict in Ukraine, which commenced in February 2022. “The market reacted unexpectedly to the U.S. decision to impose sanctions on two of Russia’s largest oil producers, Rosneft PJSC and Lukoil PJSC, which collectively account for almost half of the nation’s total crude exports. Nonetheless, apprehensions regarding an oversupply of oil persist,” analyst noted.