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Oil prices inched higher during Asian trading on Thursday, with data showing a significant drop in U.S. crude stockpiles providing some support, although concerns over U.S. tariffs and trade negotiations ahead of President Donald Trump’s deadline kept investors cautious.
Market Overview:
- Brent Oil Futures for September rose 0.3% to $68.69 per barrel.
- West Texas Intermediate (WTI) crude futures gained 0.3% to $65.45 per barrel.
This uptick followed a series of declines in both contracts over the past four sessions, primarily due to fears that Trump’s Aug. 1 tariff deadline could dampen global energy demand.
U.S. Crude Stockpiles Decline:
The Energy Information Administration (EIA) reported a sharp drop in U.S. crude oil inventories, which added support to oil prices. For the week ending July 19, crude stockpiles fell by 3.17 million barrels, much more than the 1.6 million-barrel draw expected by analysts.
- Commercial stockpiles now stand about 9% below the five-year seasonal average, at approximately 419 million barrels, signaling a tighter supply balance.
- Gasoline stocks also saw a 1.7 million-barrel decline, exceeding the forecasted 900,000-barrel drop.
- Distillate inventories increased by 2.9 million barrels, reflecting seasonal restocking.
The combination of tightening supply and strong U.S. demand fueled the rise in oil prices following the EIA’s report.
Trade Deal Between U.S. and Japan:
On Wednesday, President Trump announced a trade agreement with Japan, which is seen as a positive development for both global trade sentiment and U.S. exports. The deal included a reduction in tariffs on Japanese imports to the U.S. from 25% to 15%.
- The agreement secured a $550 billion Japanese investment into the U.S. economy, including opening markets to U.S. automobiles, agricultural goods, and energy products.
- This deal follows a series of trade agreements by the White House ahead of the August 1 deadline, fueling optimism that further favorable trade deals could be struck before tariffs take effect.
Caution Over European Union Trade Talks:
However, investors remain cautious about ongoing trade talks with the European Union. The EU has signaled it is preparing retaliatory measures against U.S. tariffs if an agreement cannot be reached before the deadline.
- Trump’s tariffs are still expected to impose pressure on global markets, particularly with the EU considering countermeasures, which has left traders on edge.
The market remains focused on the U.S.-EU trade negotiations while balancing concerns about energy demand amid tariff uncertainty. Despite positive signals from the U.S.-Japan trade deal, uncertainty over the broader trade landscape continues to weigh on investor sentiment.
- Oil prices will likely remain volatile as traders digest trade deal progress and monitor for any further developments in the ongoing tariff discussions.
