Oil prices rose on Tuesday as the United States and China prolonged a pause on higher tariffs, alleviating concerns that an escalation in their trade war would disrupt their economies and diminish fuel demand in the world’s two largest oil consumers.
Brent crude futures increased by 26 cents, or 0.39 percent, reaching $66.90 a barrel, while U.S. West Texas Intermediate crude futures climbed 22 cents, or 0.34 percent, to $64.18.
U.S. President Donald Trump extended a tariff truce with China for an additional 90 days, a White House official confirmed on Monday, averting triple-digit duties on Chinese goods as U.S. retailers geared up for the critical end-of-year holiday season.
This development has bolstered hopes that a resolution could be achieved between the world’s two largest economies, potentially helping to avoid a de facto trade embargo between them. Tariffs pose a risk of slowing economic growth, which could undermine global fuel demand and push oil prices lower.
Trump-Putin meeting anticipation
Investors are also anticipating a meeting between Trump and Russian President Vladimir Putin on August 15 in Alaska to discuss a resolution to the war in Ukraine. The meeting occurs amidst heightened U.S. pressure on Russia, including the threat of stricter penalties on Russian oil buyers like China and India if a peace deal is not reached, which could disrupt oil trade flows.
Trump established a deadline of last Friday for Russia to agree to peace in Ukraine or face secondary sanctions on its oil buyers, while also urging India to decrease its purchases of Russian oil. Washington has been pressuring Beijing to halt its imports of Russian oil as well, with Trump warning of potential secondary tariffs on China.
The likelihood of these sanctions being implemented has diminished ahead of the August 15 Trump-Putin meeting.
Additionally, U.S. inflation data is on the agenda for later in the day, which could provide insights into the Federal Reserve’s interest rate trajectory. Any indication that the central bank may reduce rates soon would support crude prices.
U.S. crude production forecast
Oil market forecasts for 2025 remain cautiously optimistic but highlight notable risks. According to the U.S. Energy Information Administration’s (EIA) latest Short-Term Energy Outlook, U.S. crude oil production is expected to reach record highs, averaging about 13.59 million barrels per day in 2025, slightly up from earlier estimates. The EIA also projects U.S. petroleum consumption to hold steady at approximately 20.5 million barrels per day. Globally, liquid fuels production is anticipated to increase by 1.7 million barrels per day, primarily led by non-OPEC+ producers such as the U.S., Canada, Brazil, and Guyana. However, the growth in global liquid fuels demand is forecast to be more modest at around 1.4 million barrels per day, driven chiefly by increased consumption in emerging markets like India and China. This demand growth remains slower compared to pre-pandemic trends, according to the EIA.
The International Energy Agency (IEA), in its March 2025 Oil Market Report, downgraded its world oil demand forecast for 2025 slightly to 103.91 million barrels per day, citing “underwhelming” consumption data and a more cautious macroeconomic outlook influenced in part by tariff concerns. The IEA underscores the downside risks posed by tariff-induced economic stagnation and highlights emerging signs of slowing oil demand growth from key countries such as Brazil, India, and Singapore. Yet, the agency also notes that lower oil prices have provided relief to emerging economies, with expectations of stronger year-on-year growth for 2025 in these regions. Supply from OPEC+ and other producers is expected to increase, although uncertainties remain about compliance with planned production adjustments.
Goldman Sachs price forecast
Analysts at Goldman Sachs maintain a Brent crude price forecast averaging $64 per barrel for the fourth quarter of 2025 but caution about downside demand risks stemming from geopolitical and economic uncertainties. Commodia’s August 2025 forecast suggests Brent crude could average around $74 per barrel, reflecting ongoing supply concerns and geopolitical tensions, despite recent tariff truce progress between the U.S. and China. Market volatility and sensitivity to inflation, OPEC+ production decisions, and the evolving U.S.-China trade dynamics will continue to influence oil prices throughout the year.
The significant role of U.S.-China trade relations in shaping oil market sentiment cannot be overstated. China accounts for approximately 11 million barrels per day of oil imports, representing around 11 percent of global demand, making trade restrictions or tariffs between these two nations a major factor in global energy markets. Past trade tensions have demonstrated the sensitivity of oil prices to disruptions in trade, with severe tariff measures having the potential to shave off 0.5-1.5 percent from China’s GDP, consequently impacting global oil demand. Efforts to maintain tariff pauses, therefore, are viewed as positive developments for stabilizing oil markets and supporting demand growth forecasts.
