Oil prices are caught in a geopolitical storm, holding steady in Asian markets on Thursday despite a whirlwind of tariff threats and trade uncertainties.
According to Oil Price.com, traders are grappling with flat oil prices after earlier weekly gains, as escalating U.S. sanctions, tariff policies, and mixed inventory data send conflicting signals about global crude supply and demand.
This week, both WTI and Brent crude benchmarks surged by about 7%, driven by fears of supply disruptions from U.S. policies. WTI stood at $69.99 per barrel, while Brent was priced at $73.10 per barrel on Thursday morning in Asia. These gains reflect growing concerns over economic pressures on major oil producers.
President Trump intensified pressure on Russia by slashing the deadline for a peace agreement with Ukraine from 50 days to just 10-12 days. He also threatened secondary tariffs of up to 100% on nations importing Russian oil if no progress is made. This puts countries like India, a key buyer of discounted Russian crude, in a tight spot.
Adding to the tension, Trump confirmed that 25% tariffs on Indian imports will kick in on Friday. Trade discussions between the U.S. and India continue, but the uncertainty is rattling Indian refiners. This anxiety is spilling over into global oil markets, pushing volatility higher.
The Brent-Dubai spread has slid deeper into discount territory as refiners pivot to more secure Middle Eastern supplies. For free-market advocates, this meddling in trade flows is a classic case of government overreach distorting price signals. It's a reminder to stay nimble in volatile markets.
On Wednesday, the EIA reported a massive 7.7 million barrel build in U.S. crude inventories for the week ending July 25, the largest in months. Stockpiles hit 426.7 million barrels, driven by a sharp 1.16 million barrel per day drop in exports. This buildup suggests weaker external demand, a bearish signal for prices.
Yet, not all data points south—U.S. gasoline stocks dropped by 2.7 million barrels, far exceeding the expected draw of 600,000 barrels. This indicates robust demand during the peak driving season, a bullish note for refiners. Meanwhile, distillate stocks rose by 3.64 million barrels, easing worries about tightness in that segment.
The mixed inventory report failed to move markets significantly, as geopolitical headlines dominated trader focus. It's a stark reminder that fundamentals often take a backseat when Washington wields its economic hammer.
Also on Wednesday, the U.S. rolled out new sanctions on over 115 Iran-linked individuals, companies, and ships. This "maximum pressure" campaign follows airstrikes on Iranian nuclear sites in June, signaling a broader push to isolate key oil producers. The administration also warned China, a top buyer of Russian and Iranian crude, of steep tariffs if purchases continue.
These actions hint at constrained global supplies in the months ahead, a potential tailwind for oil prices. As Toshitaka Tazawa of Fujitomi Securities noted, "Concerns that secondary tariffs... will tighten supplies continue to drive buying interest."
Yet, demand fears are capping gains, fueled by the Federal Reserve's relatively hawkish stance on Wednesday. Traders are now eyeing inflation data and jobs numbers due today and tomorrow for clues on monetary policy direction. Tightening could dampen economic growth—and oil demand.
For investors, this chaos underscores the risks of government-driven market distortions. Tariffs and sanctions may boost prices short term, but they also breed unpredictability—hardly a friend to long-term wealth building.
Consider diversifying energy exposure beyond crude—think natural gas or renewables—if geopolitical risks escalate further. Keep an eye on inventory trends and demand signals like gasoline draws for actionable insights. And above all, don’t let headline noise drown out disciplined investing principles. In a world where policy trumps fundamentals, frugality and patience remain your best tools. Stay informed, hedge smartly, and remember: markets reward those who adapt to chaos, not those who panic in it.