Oil prices extended their upward trajectory on Tuesday, buoyed by optimism for enhanced economic activity following the U.S.-EU trade deal, a potential truce in U.S.-China tariffs, and President Donald Trump’s expedited timeline for Russia to conclude the Ukraine war.
By 00:00 GMT, Brent crude futures increased by 24 cents, or 0.34 percent, reaching $70.28 a barrel (currently trading above $69.2), while U.S. West Texas Intermediate crude rose 22 cents, or 0.33 percent, to $66.93 a barrel (currently trading above $66.62). Both contracts had settled more than 2 percent higher in the preceding session, with Brent achieving its peak level since July 18 on Monday.
Vijay Valecha, chief investment officer, Century Financial, told Economy Middle East, “During Tuesday’s Asian session, both oil instruments traded slightly lower, with WTI about 0.58 percent lower and Brent about 0.45 percent lower. From a technical perspective, WTI bounced back from the crucial $66 level, which has served as support for prices for more than a month. Prices formed a bullish engulfing candle on the daily chart, crossing above the 9- and 21-SMAs, indicating short-term bullishness. The 200-day SMA near $68.39 acts as immediate resistance, with a potential breakout above the level that could serve as a catalyst to reach the $70.02 level from the July 14’s highs.”
The trade agreement between the United States and the European Union, while imposing a 15 percent import tariff on the majority of EU goods, averted a catastrophic trade war between these significant partners that could have reverberated across nearly a third of global trade and dampened the outlook for fuel demand.
Support from U.S.-China trade truce
Oil prices also gained support from reports of a potential extension of the trade truce between the U.S. and China, with senior economic officials from both nations convening in Stockholm on Monday for over five hours of discussions. These talks are anticipated to continue on Tuesday.
In the meantime, Trump set a new deadline on Monday, stating “10 or 12 days” for Russia to make headway toward ending the war in Ukraine or face potential sanctions. He has warned of sanctions against both Russia and purchasers of its exports unless notable progress is achieved.
Tuesday’s subdued movements reflected investor caution in advance of the Federal Reserve meeting commencing later that day, alongside a range of significant U.S. economic data expected this week.
“Crude oil prices rallied to a weekly high on Monday, with WTI up 2.79 percent and Brent up 2.89 percent by close. This was driven as investors digested President Trump’s threat towards Russia. He stated that Russia would be given a new deadline of 10 to 12 days to make progress towards ending the war with Ukraine, with failure to do so resulting in 100 percent tariffs on countries continuing to buy Russian exports, which could severely impact Russia’s oil flows and support the commodity. Additionally, reports of a possible extension of existing U.S.-China trade tariffs are lifting hopes for improved economic activity in the largest oil consumers, boding well for oil demand prospects. This adds to the recent optimism created by the U.S.-EU and U.S.-Japan trade deals, easing market jitters,” further noted Valecha.
Read more: Oil prices rise to $68.92 as U.S.-EU trade deal eases demand concerns
OPEC+ supply compliance discussion
Market participants were also evaluating the progress of the U.S. trade deal ahead of Trump’s imminent deadline. The U.S.–EU agreement, announced on Sunday, imposes a 15 percent tariff on most European exports to the United States, reduced from an initially threatened 30 percent. It includes a pledge from the EU to purchase $750 billion worth of U.S. energy products in the upcoming years.
Analysts indicated that the dual factors of diminished trade uncertainty and long-term demand commitments enhanced investor risk appetite, thereby supporting oil prices. On the supply front, an OPEC+ panel has urged full adherence to established quotas as a ministerial meeting on August 3 prepares to deliberate on a potential production increase for September.
Investors remain cautious as they anticipate U.S. economic data and the Federal Reserve policy meeting. The central bank is set to commence its two-day gathering on Tuesday, with expectations to maintain interest rates within the 4.25 percent to 4.50 percent range.
