Oil prices increased slightly during Asian trading on Wednesday after experiencing three consecutive days of decline. This uptick follows a recent U.S. trade deal with Japan that indicates progress on tariffs, although the overall gains were limited by diminished expectations for a significant outcome at an upcoming EU-China summit.
Brent crude futures climbed by 21 cents, or 0.31 percent, reaching $68.80 a barrel by 03:51 GMT (currently trading above $68.75). Meanwhile, U.S. West Texas Intermediate crude futures rose by 17 cents, or 0.26 percent, to $65.48 per barrel (currently trading above $65.45).
Both benchmarks had dropped approximately 1 percent in the previous session after the EU announced it was contemplating countermeasures against U.S. tariffs, leading to waning optimism for a resolution ahead of the August 1 deadline.
President Donald Trump stated on Tuesday that the U.S. and Japan had finalized a trade deal that includes a 15 percent tariff on U.S. imports from Japan. He also noted that Japan had committed to investing $550 billion in the U.S.
Low expectations for EU-China Summit
Traders are expressing concerns that Trump’s tariff policies may result in a slowdown of global economic growth and diminished energy demand, potentially putting downward pressure on WTI prices. Trump mentioned that reciprocal tariffs would increase on August 1 for trade partners that have not reached an agreement with the U.S. Earlier this week, he threatened a 30 percent tariff on imports from the European Union (EU) if no deal was finalized.
In the meantime, industry expectations remain low for Thursday’s EU-China summit, which will test the bloc’s unity and resolve amid escalating trade tensions with both Beijing and Washington.
According to the Chinese ministry, China’s commerce minister and the European Union’s trade chief had a “candid and in-depth” discussion regarding economic and trade cooperation, along with other issues that both sides face leading up to the summit.
Separately, market sources reported that U.S. crude and gasoline stocks saw a decline last week, as cited by the American Petroleum Institute figures released on Tuesday. Distillate stocks, however, increased by 3.48 million barrels.
Global supply glut concerns
In another encouraging sign for the crude market, the U.S. energy secretary indicated on Tuesday that the U.S. is considering sanctioning Russian oil to expedite the resolution of the war in Ukraine.
Additionally, worries about an expanding global oil supply glut may contribute to downward pressure on WTI. The Iraqi government has officially resumed crude oil exports from the Kurdistan Region after a halt of over two years. This move is expected to alleviate tensions between Baghdad and Erbil while boosting national export volumes. Kurdistan anticipates supplying Iraq’s crude market with 230,000 barrels per day (bpd) once exports resume. The potential for increased crude exports from Iraq may enhance global oil supplies and undermine WTI prices in the near term.
U.S. crude oil inventories decreased last week, which could offer some support to WTI prices. The American Petroleum Institute‘s weekly crude oil stock report revealed that crude oil stockpiles in the U.S. declined by 577,000 barrels for the week ending July 18, in contrast to a rise of 19.1 million barrels the previous week. So far this year, crude oil inventories have increased by 11 million barrels, according to calculations from Oilprice based on API data.
