Oil retreats as US tariff uncertainty looms, OPEC+ set to raise output

New Straits Times

9 hours ago

SINGAPORE: Oil prices fell on Thursday after gaining three per cent in the previous session as investors remained wary that higher US tariffs may be reinstated — potentially weakening fuel demand — and as major producers are expected to announce an output hike.
Brent crude futures fell 45 cents, or 0.65 per cent, to US$68.66 a barrel by 0645 GMT. US West Texas Intermediate crude declined 44 cents, or 0.66 per cent, to US$67.01 a barrel.
Both contracts rose to their highest in one week on Wednesday after Iran suspended cooperation with the UN nuclear watchdog, raising concerns that the lingering dispute over the Middle East producer's nuclear programme may again devolve into armed conflict. This, combined with the preliminary US-Vietnam trade deal, had boosted sentiment temporarily.
Still, there is increasing uncertainty around US trade policy as the 90-day pause on the implementation of higher tariffs will end on July 9 without any new trade deals with several large trading partners such as the European Union and Japan.
Additionally, the Organization of the Petroleum Exporting Countries (OPEC) and its allies such as Russia — known as OPEC+ — are likely to agree to raise their output by 411,000 barrels per day (bpd) at their meeting this weekend.
With uncertainty surrounding both events, and the upcoming July Fourth Independence Day holiday in the US, "market participants will probably not want to carry too much risk into the long US weekend," ING analysts said in a note on Thursday.
Adding to the negative sentiment, a private-sector survey showed on Thursday that service activity in China — the world's biggest oil importer — expanded at the slowest pace in nine months in June as demand weakened and new export orders declined.
A surprise build in US crude inventories also underscored demand concerns in the world's biggest crude consumer.
The US Energy Information Administration said on Wednesday that domestic crude inventories rose by 3.80 million barrels to 419 million barrels last week. Analysts in a Reuters poll had expected a drawdown of 1.80 million barrels.
Gasoline demand on a weekly basis dropped to 8.6 million barrels per day, prompting concerns about consumption during the peak US summer driving season.
The market will also be watching the release of the key US monthly employment report on Thursday to help shape expectations around the depth and timing of interest rate cuts by the Federal Reserve in the second half of this year.
Lower interest rates could spur economic activity, which would in turn boost oil demand.
A private payrolls report on Wednesday showed a contraction for the first time in two years, though analysts cautioned there is no direct correlation between it and the government data.