Global oil markets retreated on Thursday as traders grappled with mounting concerns over weakening demand driven by potential U.S. tariff reinstatements and an anticipated production increase from major oil-producing nations.
Brent crude futures, the international benchmark, dropped 58 cents to $68.53 per barrel by mid-morning GMT, marking a 0.8% decline. Meanwhile, U.S. West Texas Intermediate crude fell 57 cents to $66.88, down 0.9% for the session.
The pullback comes after both contracts reached one-week highs Wednesday following Iran’s decision to suspend cooperation with the United Nations nuclear watchdog. That development had sparked fears that the ongoing nuclear dispute could escalate into military conflict, potentially disrupting Middle Eastern oil supplies.
However, market sentiment shifted as attention turned to more immediate economic pressures. The looming expiration of a 90-day pause on higher U.S. tariffs on July 9 has created uncertainty among traders, particularly as several major trading partners, including the European Union and Japan, have yet to finalize trade agreements with Washington.
Adding to supply-side pressures, the OPEC+ alliance of oil producers is widely expected to approve a production increase of 411,000 barrels per day at its policy meeting this weekend. The move would inject additional crude into global markets already grappling with demand concerns.
Economic data from China, the world’s largest oil importer, further dampened market optimism. A private-sector survey revealed that service sector activity expanded at its slowest pace in nine months during June, with weakening domestic demand and declining export orders painting a concerning picture for future oil consumption.
The demand outlook in the United States, the world’s biggest crude consumer, also showed signs of stress. The Energy Information Administration reported Wednesday that domestic crude inventories unexpectedly rose by 3.8 million barrels to 419 million barrels last week, defying analyst expectations of a 1.8 million barrel drawdown.
Market participants are now turning their attention to Thursday’s monthly U.S. employment report, which could significantly influence Federal Reserve policy decisions. A weaker-than-expected jobs report might accelerate the central bank’s timeline for interest rate cuts, potentially stimulating economic activity and boosting oil demand in the latter half of the year.
The conflicting signals highlight the complex dynamics currently shaping oil markets, where geopolitical tensions continue to provide upward price pressure even as economic fundamentals point toward softer demand ahead.
WHAT YOU SHOULD KNOW
Oil prices fell Thursday despite Middle East tensions as markets focused on two critical concerns: the July 9 expiration of the U.S. tariff pause with major trading partners still without deals, and OPEC+’s expected weekend decision to increase production by 411,000 barrels per day.
Weak demand signals from China and unexpected U.S. inventory builds underscore growing fears that supply will outpace consumption, making the upcoming U.S. jobs report crucial for determining whether Federal Reserve rate cuts can revive oil demand in the second half of 2025.
