Oil prices may have risen this week but they are likely to stay range bound for a while as the market evaluates certain fundamentals.
The oil prices fell on Thursday due to two factors. First, US President Donald Trump’s call for an end quickly to the Ukraine crisis through tariffs raised concern about potential supply issues. Second, an increase unexpected in US crude stocks reported Wednesday.
The price of West Texas Intermediate Crude Oil on the New York Mercantile Exchange at the time this article was written, had fallen by 0.3%. Brent crude oil was trading at $72.17 per barrel on the Intercontinental Exchange, down by 0.4% since the previous closing.
Trade War
The EU and US reached a deal despite the imminent August 1 deadline for tariffs.
According to the White House, this agreement will boost manufacturing and America’s economy.
The EU has committed itself to investing $600 billion and purchasing $750 billion of US energy by 2028.
The existing tariffs for steel, aluminium, and copper, which are currently in place, will not change.
FXstreet wrote in a report that “However President Trump’s recent decision to shorten the time period for Russia to reach a settlement with Ukraine to just 10-12 days from 50 may also have frightened market participants over possible constraints to supply chains.”
Recent increases in oil prices are attributed to concerns about possible oil supply restrictions. The US has threatened sanctions against Russia, and secondary tariffs of up to 100 percent could be imposed on countries who continue to import Russian oil.
David Morrison is a senior analyst with Trade Nation. He said that if Russia fails to comply Mr. Trump will impose secondary sanctions against major buyers of Russian crude oil. This includes China and India.
This crutch may disappear if Mr Trump changes his mind.
US Stockpiles
According to the Energy Information Administration’s weekly report, US crude oil stocks increased by 7.7 million barges last week. The outlook was largely negative.
Crude Oil Exports have seen a dramatic decline in the past week, with a drop of 1,16 million barrels – their lowest level since August 2023.
The primary reason for the weakness was this drop.
The gasoline inventories for refined products fell by 2,72 million barrels. However, distillate fuel stock increased by 3,64 million barrels.
In a recent note, Warren Patterson, ING Group’s head of commodities, stated that the increase in stocks will ease any concerns about the tightness on the market for middle distillates.
The overall market reaction was negative, as crude oil and products stocks rose to the highest level since October 2024.
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FXstreet believes that WTI is on an upward trajectory, which leads us to assume a bullish view.
FXstreet stated that they were not surprised to see the oil price move to our support level of 67.60(S1).
WTI front-month crude oil had a good week with an increase of approximately 8%. It rose from $65 per barrel to just under $70 per barrel on Wednesday. This is a new five-week record.
Brent oil rose Thursday to a record high of $72.82 per barrel, the highest in over a month.
Crude oil prices rose this week after breaking out from the upper end of their recent range.
Morrison, from Trade Nation said: “But oil is a volatile commodity and has seen many false upward breakouts. The bulls should be alert.”
Oil could be set for an extended upward run if it can hold above the trendline at around $68.50.
The post Oil drops amid trade tensions and inventory surge: analysts see potential upside could be updated as new developments unfold
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