Oil Prices Decline On July 22: US-EU Tariff Fears Hit Global Demand

A weaker US dollar has offered some limited support to oil prices, making crude slightly cheaper for buyers dealing in other currencies.

The Organisation of the Petroleum Exporting Countries (OPEC) and its allies have started reversing previous output cuts, boosting availability in the market.

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Oil prices declined on Tuesday as escalating trade tensions between the United States and the European Union triggered fears of a slowdown in global economic activity, which could impact fuel consumption.

Brent crude futures dropped by 28 cents, or 0.40 per cent, to $68.93 per barrel by nearly 12:30 PM, while US West Texas Intermediate (WTI) crude slipped 37 cents, or 0.55 per cent, to $66.83 per barrel. Both crude benchmarks had ended marginally lower in the previous session, reported Reuters.

As the August WTI contract approaches expiry on Tuesday, the more actively traded September contract also showed weakness, falling by 29 cents, or 0.44 per cent, to $65.66 per barrel.

“Broad demand concerns continue to simmer amid escalating global trade tensions, especially as markets eye the latest tariff threats between major economies and Trump's potential announcements ahead of the August 1 deadline,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. She added that investors were also keeping a close watch on the implications of fresh US sanctions on Russian crude.

Rising supply and sanctions add to volatility

Despite earlier concerns around supply shortages, the oil market has been somewhat reassured by increased production from major producers and a ceasefire reached on June 24 between Israel and Iran. These developments have reduced immediate geopolitical risks. However, the prevailing uncertainty around the global economic environment continues to weigh heavily on investor sentiment.

A weaker US dollar has offered some limited support to oil prices, making crude slightly cheaper for buyers dealing in other currencies. Still, the downward pressure from trade-related anxieties remains dominant. “Prices have slipped as trade war concerns offset the support by a softer (US dollar),” noted Tony Sycamore, market analyst at IG.

Sycamore also highlighted the possibility of rising tensions between Washington and Brussels. The European Union is reportedly preparing a wider range of retaliatory measures against the US, as hopes for a mutually acceptable trade deal wane. Washington has issued a warning of imposing a 30 per cent tariff on EU imports by August 1 should negotiations fail.

Adding to the bearish sentiment, global supply appears to be growing. The Organisation of the Petroleum Exporting Countries (OPEC) and its allies have started reversing previous output cuts, boosting availability in the market. Notably, Saudi Arabia’s crude exports reached a three-month high in May, according to data released by the Joint Organizations Data Initiative on Monday.

With rising supplies and trade-related uncertainties looming, oil markets are likely to remain volatile in the near term.