Global Oil Prices Waver Amidst Tariff Worries and Shifting Demand Outlook

The global oil market is currently navigating a period of unease, with prices showing a declining trend driven primarily by uncertainties around impending U.S. tariffs and a less robust outlook for global fuel consumption. This situation is further complicated by mixed signals from inventory data and ongoing geopolitical tensions.

In recent trading, both West Texas Intermediate (WTI) and Brent crude futures have seen slight reductions. WTI futures for the front month declined by just under 0.2% to $67.10 per barrel, while Brent crude futures for the front month experienced a decrease of more than 0.1% to $69.07 per barrel. This softness in prices reflects market apprehensions about future demand, especially as U.S. crude inventories, despite a weekly draw, showed increases in gasoline and distillate stocks, hinting at underlying demand that might be less than seasonal expectations.

Broader market reactions have been somewhat subdued even in the face of new European Union sanctions against Russia and the nearing August 1 U.S. tariff deadline. Analysts suggest the six-month grace period for the EU sanctions against Russia may be contributing to this muted immediate impact. There's also speculation that proposed U.S. tariffs, potentially up to 100% on countries buying Russian oil from third parties, might see a delayed implementation beyond their initial September 2 target.

However, concerns over diesel supply, partly due to the sanctions package, did offer some limited support to crude prices. The premium for low-sulfur gasoil futures over Brent crude increased by approximately 3%, reaching its highest point since February 2024. This indicates market awareness that disruptions to Russian oil flows could tighten diesel availability.

Despite this, major oil benchmarks have fallen in five of the past six sessions. The August Nymex crude contract saw a reduction of just over 0.1% to $67.20 per barrel, and the September Brent contract ended down by just under 0.1% at $69.21 per barrel. In contrast, U.S. natural gas futures experienced a notable drop of more than 6%.

Overall, oil prices continue to drift lower as concerns about escalating trade disputes between the U.S. and the European Union intensify. These fears suggest a potential curbing of fuel demand due to reduced economic activity. Brent crude futures decreased by just over 0.3% to $68.97 a barrel, building on a previous session's decline of just over 0.1%. Similarly, U.S. West Texas Intermediate crude was priced at $66.99 a barrel, down just over 0.3%.

The oil market has struggled to find firm direction since the June 24 ceasefire concerning the conflict between Israel and Iran, which eased major supply disruption fears in the Middle East. Since then, both Brent and WTI have traded within relatively tight ranges, as increased output from major producers has balanced out supply concerns. However, a weakening U.S. dollar has provided some underpinning for crude, making it more affordable for international buyers. The ongoing threat of heightened trade tensions, particularly with the U.S. proposing a tariff of just under one-third on EU imports if a trade agreement isn't reached by August 1, remains a significant bearish factor. Furthermore, data indicates rising supply, with Saudi Arabia's crude oil exports in May reaching their highest in three months as OPEC and its allies unwind previous production cuts.