Oil News: Oil Demand at Risk as EU-US Trade Tensions Peak August 1st

Trade Wars Cast Long Shadow Over Oil Markets

Light crude oil endured a volatile week, with prices swinging between $64.71 and $66.74 as escalating U.S.-EU trade tensions dominated market sentiment.

The looming August 1 tariff deadline created persistent headwinds, with President Trump’s threat of 30% tariffs on EU imports raising concerns about global economic activity and fuel demand.

While a modest U.S.-Japan trade agreement provided brief optimism, the broader trade uncertainty kept crude prices under pressure for most of the week.

Last week, Light Crude Oil futures settled at $65.16, down $0.89 or -1.35%.

The European Union’s retaliatory stance, proposing tariffs on $109 billion worth of U.S. goods, only amplified market concerns. Traders are increasingly focused on whether these trade disputes will materially impact global energy consumption, particularly as both OPEC and the IEA have already dialed back their 2025 demand growth forecasts.

Inventory Draws Provide Welcome Relief to Bulls

A significant bright spot emerged midweek when the Energy Information Administration reported a larger-than-expected 3.2 million barrel draw in U.S. crude inventories, more than double analyst forecasts. This bullish surprise helped stabilize prices and reminded traders that underlying fundamentals remain supportive despite macro headwinds.

The inventory decline, coupled with continued strength in distillate margins, provided crucial support during the week’s most challenging sessions. Asian crude imports have also defied pessimistic forecasts, with China and India leading a 510,000 barrel per day increase in the first half of 2025, driven by opportunistic buying at softer price levels.

Supply Disruptions Add Geopolitical Premium

Multiple supply hiccups kept traders on edge throughout the week. Azerbaijan’s BTC crude loadings faced contamination-related delays at Turkey’s Ceyhan port, while Russia temporarily halted operations at key Black Sea terminals. Though these disruptions were ultimately resolved, they highlighted the market’s ongoing sensitivity to export bottlenecks.

Meanwhile, the EU’s 18th sanctions package against Russia, including bans on refined products processed from Russian crude in third countries, had minimal immediate impact. Analysts remain skeptical about enforcement capabilities, with Russians demonstrating consistent ability to circumvent previous restrictions.

Looking Ahead: Fundamentals vs. Sentiment Battle

The week ahead will likely hinge on whether inventory fundamentals can overcome persistent trade war fears. OPEC+ signals regarding potential output increases and developments in Venezuelan supply prospects add additional variables to monitor. With crude holding above key moving averages but lacking strong catalysts, prices appear poised for continued range-bound trading unless geopolitical or trade developments provide clearer direction.

Technically, the trend is up according to the weekly swing chart. A trade through $62.69 will shift momentum to the downside.

The market is holding on the strong side of the 52-week moving average at $64.35, making it cautiously bullish. The rally will strengthen further on a sustained move over the long-term pivot at $65.37.

More Information in our Economic Calendar.