Oil prices maintain stability as the US and China postpone tariff imposed date
The Organization of the Petroleum Exporting Countries (OPEC) published a monthly report on Tuesday, indicating a tighter market outlook for oil. This comes after U.S. President Donald Trump extended a tariff truce with China to November 10, providing some stability for global markets during a critical retail season.
The tariff truce has eased downward pressure on oil prices by reducing trade tension fears, thereby supporting global growth prospects and mitigating inflation risks tied to tariff escalations. However, ongoing uncertainties remain, such as the outcome of the August 15 meeting between U.S. and Russian presidents regarding the Ukraine war, which could also affect oil supply dynamics and prices if a peace deal reduces supply disruptions from Russian oil.
U.S. consumer prices increased in July due to tariff-induced rising costs for imported goods. As a result, Brent crude futures decreased by 0.54% to $66.27 a barrel on Tuesday, while U.S. West Texas Intermediate crude futures decreased by 0.7% to $63.51.
The OPEC report trimmed its forecast for growth in oil supply from the United States and other producers outside the wider OPEC+ group. On the demand side, the forecast for global oil demand in 2025 remains unchanged, but the forecast for 2026 is 1.38 million barrels per day higher than the previous forecast, indicating a stronger demand outlook for next year.
The extension of the U.S.-China tariff truce raises hopes of an agreement between the two countries to avert a virtual trade embargo. Trump has also pressured India and China to reduce their purchases of Russian oil, and if a ceasefire or peace deal in Ukraine is closer after the meeting between Trump and Putin, Trump may suspend the secondary tariffs imposed on India.
If there is no progress in the Ukraine conflict, tougher sanctions against other buyers of Russian oil, such as China, could be imposed. This could potentially impact the oil market, as Russia is one of the world's largest oil producers.
In summary, the extension of the U.S.-China tariff truce has provided some relief for the oil market, but ongoing geopolitical and economic uncertainties continue to influence the outlook for oil prices and global economic growth beyond this trade development.
The tariff truce's effect on oil prices could potentially lessen inflation risks associated with trade escalations, leading to a more favorable environment for economic growth. Meanwhile, the risk of further disruptions to oil supply from geopolitical uncertainties, such as the Ukraine conflict, persist and pose a significant threat to sports events that rely heavily on petroleum-based fuels.
