Oil Retreats From Two-Week Peak As Tariff Uncertainty Clouds Market Outlook
The revised deadline of August 1, which Trump declared as final, gave some reprieve to key trade allies, including Japan, South Korea, and the European Union.
Oil prices gave up some of their recent gains on Wednesday, slipping modestly after reaching two-week highs in the previous trading session. Market participants appeared cautious as they weighed the potential implications of evolving US trade policies and ongoing global geopolitical developments.
Close to 7 AM, Brent crude futures had eased by 20 cents, or 0.3 per cent, to trade at $69.95 per barrel. US West Texas Intermediate (WTI) crude also edged down, falling 21 cents, or 0.4 per cent, to $68.12 per barrel, reported Reuters.
The recent pullback comes as traders digested US President Donald Trump’s decision to postpone a scheduled tariff increase. The revised deadline of August 1, which Trump declared as final, gave some reprieve to key trade allies, including Japan, South Korea, and the European Union. However, the announcement created further uncertainty for smaller exporters such as South Africa and left businesses uncertain about the broader policy trajectory.
Broader Trade War Escalation and Demand Signals
In a move that could have broader economic repercussions, Trump also revealed plans to implement a 50 per cent tariff on imported copper and confirmed that new duties would soon be applied to semiconductors and pharmaceutical products. These developments have heightened fears of trade-induced demand destruction for commodities like oil.
Despite these concerns, travel-related demand offered some support to market sentiment. According to the American Automobile Association (AAA), a record 72.2 million Americans were projected to travel more than 80 kilometres over the July 4 holiday weekend, offering a temporary boost to fuel consumption.
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Supply-Side Dynamics and Geopolitical Tensions in Focus
Meanwhile, supply expectations remain mixed. The US Energy Information Administration (EIA), in its latest monthly outlook, revised its crude oil production forecast for 2025 downward to 13.37 million barrels per day (bpd), compared to 13.42 million bpd in its previous estimate. Output in 2026 is projected to remain unchanged at 13.37 million bpd.
OPEC+ producers are expected to authorise another output increase for September, according to five sources familiar with the group's discussions. The move follows an earlier decision to lift production by 548,000 bpd for August. However, analysts note that actual increases have fallen short of announced levels, with Saudi Arabia contributing most of the additional supply.
Adding to the complex landscape, renewed violence in the Middle East is providing a floor for oil prices. Four crew members aboard the Liberian-flagged vessel Eternity C were killed in an attack involving drones and speedboats off the coast of Yemen. The incident, which follows months of relative calm in the region, marked the second such assault reported in a single day.
With trade policy developments, shifting demand forecasts, and rising geopolitical risks all at play, investors remain alert to further signals that could shape the oil market’s direction in the coming weeks.
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