Oil Prices Retreat Amid U.S. Tariff Uncertainty and OPEC+ Output Increase

Oil prices retreated on Tuesday after rising nearly 2% in the previous session, as investors assessed the latest developments surrounding U.S. tariffs and the higher-than-expected increase in OPEC+ output for August.

Tariff Concerns Weigh on Market Sentiment

By 1043 GMT, Brent crude futures were down 12 cents, or approximately 0.2%, at $69.46 a barrel, while U.S. West Texas Intermediate (WTI) crude futures lost 25 cents, or about 0.4%, at $67.68.

The retreat in oil prices comes as U.S. President Donald Trump began notifying major trade partners that sharply higher U.S. tariffs would take effect on August 1. Although Trump later signaled that this deadline may not be “100% firm,” the uncertainty surrounding the tariff timeline raised concerns across the market. Investors are particularly worried that these tariffs could have negative repercussions for the global economy and oil demand, adding volatility to oil prices.

OPEC+ Production Hike Adds Pressure

Oil prices were also pressured by the decision of the OPEC+ group, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, to increase production by 548,000 barrels per day (bpd) in August. This output hike exceeded the 411,000 bpd increases agreed upon for the previous three months, signaling a potential increase in global supply just as demand is expected to slow seasonally.

Janiv Shah, an analyst at Rystad, noted that while OPEC+ unwinding its voluntary output cuts may be putting downward pressure on prices, other factors like tightness in middle distillates and Houthi attacks on cargo ships are offering support to the market.

Bullish Sentiment Heading into Peak Summer Demand

Despite the pressure on prices, bullish sentiment remains in the market heading into the peak summer demand period in the United States. Data from the U.S. Commodity Futures Trading Commission showed that money managers raised their net-long futures and options positions in crude oil contracts in the week ending July 1. This suggests optimism among investors about continued demand for oil, even with concerns over supply.

Concerns Over Oversupply in the Fall

However, analysts are starting to highlight risks of oversupply in the coming months. HSBC analysts noted that once seasonal demand for oil starts to decline, the increased OPEC+ exports are likely to hit the market, creating downside risks for prices.

Commerzbank analysts also predict that the price of Brent crude could fall to $65 a barrel in the autumn months due to emerging oversupply.

OPEC+ Output Decisions and Long-Term Market Outlook

The OPEC+ decision to raise output comes after removing nearly all of the 2.2 million bpd voluntary cuts made by the group since 2023. According to sources, OPEC+ is expected to approve an increase of around 550,000 bpd for September when it meets again on August 3, effectively unwinding all of the cuts.

While the immediate market reaction to these developments has been a retreat in oil prices, longer-term forecasts remain uncertain. Investors and analysts will closely monitor future OPEC+ meetings and trade developments for further clues on the direction of global oil prices.