Oil prices fell on Thursday after rising 3% on Wednesday. Brent crude lost 45 cents, or 0.65%, to $68.66 a barrel, and U.S. West Texas Intermediate dropped 44 cents, or 0.66%, to $67.01 by 6:45 GMT. The pullback reflected heightened anxiety about the possible return of higher American tariffs and an expected increase in oil production by OPEC+ this weekend.
Investors briefly rallied on Wednesday after Iran stopped coöperating with the United Nations nuclear watchdog, the latest episode to paint the picture of renewed discord, and after the United States reached a preliminary trade deal with Vietnam. But sentiment turned with growing anxiety around the July 9 deadline, when a 90-day pause on U.S. tariffs ends. Major trading partners like the European Union and Japan have yet to hammer out new deals, and fears persist that trade will be disrupted there too.
Adding to the pressure in markets, a private survey showed that service sector activity in China, which is a major contributor to fuel demand, grew at its slowest pace in nine months in June. China is the biggest oil importer in the world, and a slowdown in that country could have serious ramifications for global demand.
Dismal U.S. statistics weighed on the mood as well. The Energy Information Administration also reported that domestic crude stockpiles unexpectedly rose by 3.8 million barrels last week, to 419 million. Analysts had anticipated a decline of about 1.8 million barrels. Demand for gasoline also slipped, to 8.6 million barrels a day, which is sort of on the low side of where it should be in the midst of the summer driving season and suggests consumption may be cooling.
In the meantime, OPEC and its allies, which are collectively known as OPEC+, are expected to reach a deal over raising production by 411,000 barrels a day when they meet. This would be the fourth consecutive month of supply increases. The move, while widely expected, is fueling concern that supply growth could outstrip demand, particularly with signs of weakening in major economies.
With the holiday weekend for July Fourth coming up in the U.S., analysts wrote that traders are being cautious and not taking on large risks. Attention is shifting to Friday’s U.S. jobs report that could shape Federal Reserve interest rate prospects in the second half of next year. Lower interest rates may help stimulate economic activity and oil demand, but current signals are mixed.
