Oil prices fell following new U.S. tariff announcements. Trade tensions and concerns over global demand are impacting the oil market outlook.
Oil prices dropped on Thursday under pressure from newly announced tariffs by the U.S. government, which experts say have cast a shadow over global economic growth and oil demand prospects. Rising trade tensions between the U.S. and other countries have intensified concerns about future energy consumption.
Impact of New Tariffs on the Oil Market
On Thursday, the oil market reacted negatively to new tariff announcements made by the U.S. administration. Experts believe these tariffs could slow global economic growth and consequently reduce oil demand. In global trading, Brent crude futures declined by 22 cents, or 0.31%, to $69.97 per barrel. Meanwhile, U.S. West Texas Intermediate crude lost 27 cents, trading at $68.11 per barrel.
Market analysts argue that the imposition of these tariffs will heighten trade tensions and darken the outlook for global oil demand. In particular, slower growth among major oil-consuming countries is a key concern for investors.
New Tariffs and Rising Global Trade Tensions
U.S. President Donald Trump announced plans to impose a 50% tariff on Brazilian exports, the largest economy in Latin America, following verbal disputes between the two nations. Furthermore, the U.S. government has announced tariffs on copper, semiconductors, and pharmaceuticals, and sent tariff letters to countries including the Philippines, Iraq, South Korea, and Japan.
The expansion of tariff policies worldwide has raised fears of disruptions in global supply chains and reduced volumes of international trade. These policies, combined with other economic pressures such as rising interest rates, could lead to lower energy consumption, particularly oil, thereby exerting downward pressure on prices.
Influence of Monetary Policy and Interest Rates on the Oil Market
Meanwhile, minutes from the recent Federal Reserve meeting revealed that only a minority of members favored an interest rate cut in the near future. Rising interest rates increase borrowing costs and reduce investment and consumption.
Given that oil demand is highly sensitive to economic conditions and interest rates, higher rates in the U.S. are expected to dampen oil demand, which has been one of the main factors behind recent declines in oil prices.
U.S. Supply and Demand Conditions
According to the U.S. Energy Information Administration (EIA), crude oil inventories increased last week, indicating ample domestic supply. However, gasoline and distillate stocks declined.
Gasoline demand rose significantly by 6% to 9.2 million barrels per day, which may signal stronger domestic consumption and economic activity. This trend alleviates some concerns about falling demand and partially offsets the downward pressure on oil prices.
Global Market Outlook and Economic Activity
Global statistics show that daily flights averaged 107,600 during the first eight days of July, setting a new record. China also recorded its highest number of flights in five months, indicating growth and recovery in transportation and global trade sectors.
Port activity and freight volumes also suggest sustained expansion in global trade. J.P. Morgan reported that global oil demand growth has averaged 0.97 million barrels per day this year, closely matching their forecast of 1 million barrels per day.
Nevertheless, concerns remain about the impact of tariffs and protectionist policies on supply chains and economic growth. If trade tensions persist, oil demand growth may be constrained, posing further challenges to the market.
Summary
The current oil market is influenced by several critical factors: newly expanded U.S. tariffs that could curb economic growth and oil demand; rising interest rates and concerns about inflationary and economic pressures; as well as positive demand trends such as increased gasoline consumption and global air traffic.
Together, these factors have created price volatility and an uncertain outlook. Market participants must closely monitor ongoing developments in global trade and economic conditions to make informed decisions in this high-risk environment.
