Oil prices saw an upswing on Wednesday, driven by expectations of robust summer demand from the world’s two largest consumers, the United States and China. However, these gains were tempered by analysts’ caution regarding the broader economic landscape.
Prices have fluctuated within a narrow range as indications of steady demand, fueled by increased travel during the Northern Hemisphere summer, contend with worries that U.S. tariffs on trading partners could impede economic growth and fuel consumption.
Brent crude futures climbed by 13 cents, or 0.2 percent, to $68.84 a barrel by 04:11 GMT (currently trading at $68.98). Meanwhile, U.S. West Texas Intermediate crude futures rose 25 cents, or 0.4 percent, reaching $66.77 (currently trading at $66.93). This rebound followed two consecutive days of declines, as the market downplayed possible supply disruptions after U.S. President Donald Trump threatened tariffs on Russian oil purchases.
Signs of economic growth from major oil producers
Major oil producers are citing signs of improved economic growth in the latter half of the year, while data from China indicates consistent expansion. “Strong seasonal demand is currently providing upward momentum to oil prices, as summer travel and industrial activity peak,” noted LSEG analysts, as quoted by Reuters. “Increased gasoline consumption, especially in the U.S. during the Fourth of July holiday period, has signalled robust fuel demand, helping offset bearish pressures from rising inventories and tariff concerns.”
Data from China revealed that growth slowed in the second quarter, but the deceleration was less severe than anticipated, partly due to frontloading to circumvent U.S. tariffs. This development alleviated some apprehensions regarding the economy of the world’s largest crude importer. Additionally, the data illustrated that China’s crude oil throughput in June surged by 8.5 percent compared to a year earlier, suggesting stronger fuel demand.
Nonetheless, some analysts perceive the price rebound as a transient phenomenon. Much of the stabilization in crude markets after two volatile sessions was attributed to a mild technical correction rather than a substantial shift in underlying fundamentals, as reported by Reuters, citing Phillip Nova’s senior market analyst Priyanka Sachdeva. “Investors should monitor inflation and interest rate expectations in the United States as Trump’s continued push for broader tariffs could be inflationary and could dampen fuel demand in the medium term,” she added.
OPEC’s optimistic outlook for oil demand
OPEC‘s outlook remains more optimistic, according to Sachdeva, who referred to the cartel’s monthly report released on Tuesday, which projected that the global economy would perform better in the second half of the year, enhancing the oil demand outlook. Brazil, China, and India are surpassing expectations, while the U.S. and EU are recovering from last year, the report noted. “The technicals may offer short-term relief, but fundamentally, the market lacks momentum,” Sachdeva remarked. “Until clarity emerges on global growth, policy direction, and real demand recovery, especially from Asia, the crude complex looks set to drift sideways.”
Oil prices declined on Tuesday following U.S. President Donald Trump’s extensive 50-day deadline for Russia to conclude the Ukraine war and avoid sanctions, which alleviated immediate supply concerns. Brent crude futures dropped 29 cents, or 0.4 percent, to $68.92 a barrel by 03:42 GMT, while U.S. West Texas Intermediate crude futures fell 35 cents, or 0.5 percent, to $66.63. Both contracts had settled more than $1 lower in the preceding session.
Initially, oil prices had surged due to news of potential sanctions but later relinquished these gains as the 50-day deadline sparked optimism that sanctions might be avoided. Traders are now considering whether the U.S. will indeed impose steep tariffs on nations that continue to trade with Russia. On Monday, Trump announced new weapon supplies for Ukraine and indicated on Saturday that he would impose a 30 percent tariff on most imports from the European Union and Mexico starting August 1, adding to similar warnings directed at other countries. Such tariffs could impede economic growth, potentially dampening global fuel demand and exerting downward pressure on oil prices.
