Oil Prices Set for Dramatic Weekly Drop on Tariff Fallout

Crude oil prices were headed for a steep weekly drop as of Friday morning, with a combination of tariff fears and OPEC+ production instilling a strong sense of bearishness in oil traders. At the time of writing, Brent crude was trading at $66.39 per barrel, with West Texas Intermediate at $63.79 per barrel, both down from Thursday’s close. Interestingly, prices fell despite President Trump’s decision to slap an additional tariff of 25% on all Indian imports as a punishment for India’s purchases of Russian crude. The additional tariffs could jeopardize an estimated 3.5 million barrels daily in oil supply, according to Wall Street analysts. According to ING commodity analysts, the news about a possible meeting between President Trump and President Putin also weighed on oil prices. The meeting “is important because it could affect the secondary tariffs on India, depending on how discussions go. However, it is important to note that President Trump’s deadline for a Russia-Ukraine peace deal expires today, leaving open the risk that the US will still tighten sanctions against Moscow,” Warren Patterson and Ewa Manthey wrote earlier today. Meanwhile, reports say Indian refiners are seeking alternative oil purchases, with Reuters reporting two state-owned majors had secured some 22 million barrels for delivery in the next couple of months from non-Russian sources. On the bullish side, crude oil imports into China increased in July by a substantial 11.5% on the year to an average daily of 11.2 million barrels. However, the import level was 5.4% lower compared to June, when China’s crude imports surged to 12.14 million bpd to the highest in almost two years. The spike in June imports reflected both restocking after refinery maintenance and opportunistic buying by independent refiners amid steep discounts on sanctioned barrels. The global oil market, meanwhile, has been revealed to be tighter than expected, despite the unwinding of OPEC+ cuts, not least because that unwinding has not been going at the full rates promised by the group. This has not, however, offset the effect of tariffs on trader sentiment. By Irina Slav for Oilprice.com