Oil prices dropped for the third straight session on Tuesday, driven by concerns that a looming trade conflict between the United States and the European Union could slow global fuel demand. As the August 1 deadline for new U.S. tariffs approaches, the fear of reduced economic activity continues to weigh on global oil markets.
Market Reaction to Trade Tensions
Brent crude futures fell by 53 cents, or 0.8%, reaching $68.68 per barrel. U.S. West Texas Intermediate (WTI) crude dropped 63 cents, or 0.9%, to $66.57 per barrel. The August WTI contract is set to expire today, while the more active September contract also dipped by 52 cents, or 0.8%, to $65.43.
Analysts attribute the decline to heightened uncertainty surrounding U.S. trade negotiations. “Oil prices fell for a third straight session as urgency builds in trade negotiations between the U.S. and its partners,” said Soojin Kim, an analyst at MUFG Bank.
Tariff Threats Raise Alarm
The Trump administration has warned that if trade deals are not finalized by August 1, steep tariffs of up to 30% will be imposed on EU imports. In response, EU diplomats said the bloc is considering broader countermeasures. The deadlock between two of the world’s largest economies raises concerns of a global economic slowdown, potentially dragging down energy demand.
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Currency and Inventory Factors
Despite the overall market weakness, some factors are cushioning the fall. A weaker U.S. dollar has helped support oil prices slightly, making crude cheaper for buyers using other currencies. This has softened some of the losses.
Tony Sycamore, a market analyst at IG, noted that “trade war concerns offset the support by a softer dollar,” suggesting that currency trends are playing a secondary but still relevant role in price movements.
Distillate Demand Offers Support
Another factor preventing a sharper decline in prices is the strong performance of distillate fuels, including diesel and jet fuel. These fuels have seen stronger profit margins due to low inventory levels.
John Evans, analyst at PVM Oil, highlighted this in a market note: “The move lower might have seen more momentum if it were not for the continued performance in distillates which continues to be aided by low stocks.”
U.S. Crude Inventory Draw Expected
Adding to the mixed signals, a Reuters poll of analysts forecasted that U.S. crude oil inventories likely fell by around 600,000 barrels in the week ending July 18. This suggests ongoing demand for crude, at least in the short term, and may offer some upside for prices in the near future.
Outlook Remains Uncertain
As oil prices fluctuate in response to geopolitical and economic shifts, all eyes are now on the outcome of U.S.–EU trade negotiations. The market remains highly sensitive to any developments that might alter the trajectory of global trade and energy demand.
Unless the standoff is resolved, further price drops remain a possibility. However, strong distillate demand and falling inventories may help prevent a full-scale collapse.
For now, oil markets are caught between competing pressures—trade fears dragging down sentiment and physical supply indicators offering modest support. The next few days will likely be crucial for determining the direction of the global oil price trend.
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