Oil prices declined on Thursday, reversing some of the gains from the previous session, as investors grew cautious over the possibility of higher U.S. tariffs being reinstated — a move that could dampen fuel demand. At the same time, markets braced for an anticipated output increase from major oil producers.
Brent crude futures dropped 45 cents, or 0.65%, to $68.66 per barrel by 0645 GMT, while U.S. West Texas Intermediate (WTI) slipped 44 cents, or 0.66%, to $67.01 a barrel.
Both benchmarks had climbed to one-week highs on Wednesday, fueled by geopolitical tensions after Iran halted cooperation with the U.N. nuclear watchdog. The move heightened fears that the prolonged dispute over Iran’s nuclear ambitions could escalate into conflict. Sentiment was also buoyed by news of a preliminary trade agreement between the U.S. and Vietnam.
However, uncertainty resurfaced as the 90-day suspension on increased U.S. tariffs is set to expire on July 9, and no comprehensive trade agreements have been finalized with major partners like the EU and Japan. This raises the risk of renewed trade tensions that could suppress global demand.
In addition, the OPEC+ alliance—which includes the Organization of the Petroleum Exporting Countries and key allies like Russia—is expected to agree on a production increase of 411,000 barrels per day at its meeting this weekend.
“With uncertainty surrounding both the upcoming OPEC+ decision and U.S. trade policy—as well as the approaching July Fourth holiday—market players are likely to avoid taking large positions,” said analysts at ING in a Thursday note.
Negative sentiment was further compounded by weak economic data out of China. A private survey showed China’s services sector grew at its slowest pace in nine months during June, as domestic demand weakened and new export orders fell—casting doubt on oil demand from the world’s top importer.
Concerns about U.S. fuel consumption also intensified after a surprise increase in domestic crude inventories. The U.S. Energy Information Administration (EIA) reported a 3.8 million-barrel build last week, bringing total inventories to 419 million barrels—contrary to analysts’ expectations of a 1.8 million-barrel drawdown.
In addition, weekly gasoline demand dropped to 8.6 million barrels per day, raising alarms about consumer activity during the peak U.S. summer driving season.
Looking ahead, investors are awaiting the release of the U.S. monthly employment report later Thursday, which could provide further clarity on the timing and scale of potential Federal Reserve interest rate cuts in the second half of the year.
Lower interest rates typically support economic activity, which can boost energy consumption. However, a private payroll report released Wednesday showed the first contraction in two years—though analysts warned the data may not align with the official government numbers.
