Oil prices fell on Thursday after U.S. President Donald Trump’s latest tariff announcements raised concerns among investors about a potential slowdown in global economic growth and weaker demand for oil.
Brent crude futures were down 0.03 percent to $70.17 a barrel by 4:01 GMT. Meanwhile, U.S. West Texas Intermediate crude lost 0.07 percent to $68.33 a barrel.
Tariff concerns mount as markets await rate cut
On Wednesday, Trump threatened Brazil, Latin America’s largest economy, with a steep 50 percent tariff on its exports to the U.S. following a public dispute with Brazilian President Luiz Inacio Lula da Silva. This followed earlier announcements of proposed tariffs on key goods like copper, semiconductors and pharmaceuticals.
His administration has also issued tariff notifications to countries such as the Philippines and Iraq, adding to over a dozen others sent earlier in the week, including to major U.S. trade partners like South Korea and Japan.
Amid mounting concerns over the inflationary impact of these tariffs, minutes from the Federal Reserve’s June 17–18 meeting revealed that only “a couple” of policymakers supported the idea of cutting interest rates as early as this month. Elevated interest rates increase borrowing costs and tend to suppress oil demand and prices.
U.S. crude stocks rise as aviation demand surges
Providing some support to oil prices, U.S. crude stocks rose as gasoline and distillate inventories fell last week, the Energy Information Administration said on Wednesday. Gasoline demand rose 6 percent to 9.2 million barrels per day last week, the EIA said.
Global daily flights were averaging 107,600 in the first eight days of July, its all-time high, with flights in China reaching a five-month peak. In addition, port and freight activities indicate ‘sustained expansion’ in trade activities from last year, J.P. Morgan said in a note.
Year to date, global oil demand growth is averaging 0.97 million barrels per day, in line with the forecast of 1 million barrels per day, the note added.
OPEC+ boosts August production levels
On Saturday, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to boost production by 548,000 barrels per day in August, surpassing the 411,000-bpd hikes implemented in the prior three months. This decision effectively reversed nearly all of the 2.2 million-bpd voluntary cuts enacted by the group and sent oil prices down.
They are expected to approve a further increase of around 550,000 bpd for September when they convene on August 3, according to five sources familiar with the matter, which would completely unwind all prior cuts. However, actual output increases have thus far been smaller than announced levels, with most supply coming from Saudi Arabia, analysts noted.
“OPEC+’s move to accelerate production appears to send a clear message to U.S. shale and other non-OPEC+ producers: the group is willing to tolerate lower prices in the short term to defend and grow its share of global output. While this may offer near-term relief for the White House in the form of softer fuel prices at the pumps, it poses challenges for U.S. producers already contending with rising costs,” said Ole Hansen, head of commodity strategy, Saxo Bank.
