Oil prices slip as investors weigh trade war impact
Oil prices dipped on Wednesday, weighed down by investor concerns over the growing threat of a global trade war, despite encouraging signals from China’s crude consumption. The market saw a decline of nearly one percent, with Brent crude futures falling to $68.08 per barrel and U.S. West Texas Intermediate dropping to $65.83.
While increased summer travel in the Northern Hemisphere has helped maintain steady demand, investors remain cautious about the economic fallout from escalating U.S. tariffs. President Donald Trump’s threat to impose a 30 percent tariff on imports from the European Union by August 1 has sparked warnings from European officials, who say such a move could disrupt trade between two of the world’s largest economies. The European Commission is already preparing countermeasures, eyeing potential tariffs on $84.1 billion worth of U.S. goods if trade talks fail.
Tensions are also rising between the U.S. and Russia, with Trump vowing to implement “very severe tariffs” in 50 days should Moscow fail to reach a deal to end the war in Ukraine. However, these threats have not spurred fears of supply disruptions, and oil prices continued to slide.
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On the other hand, signs of robust Chinese demand offered some support. State-owned refiners in China are increasing output following maintenance shutdowns, aiming to meet rising third-quarter fuel needs and replenish diesel and gasoline inventories that are currently at multi-year lows. According to Barclays, fears of a peak in Chinese oil demand appear overstated. The bank estimates China’s oil consumption grew by 400,000 barrels per day in the first half of the year, reaching 17.2 million barrels daily.
OPEC’s latest monthly report adds to the cautious optimism, projecting a stronger global economy in the second half of the year. It notes that economic performance in countries like Brazil, China, and India is exceeding expectations, while the U.S. and EU continue recovering from last year’s downturn.
Meanwhile, U.S. oil inventories posted gains last week. Crude stocks rose by 839,000 barrels, gasoline inventories increased by nearly 2 million barrels, and distillates also recorded a modest climb, according to data from the American Petroleum Institute.
