Oil prices declined on Thursday as US President Donald Trump’s August 1 tariff deadline loomed over investors, with uncertainty surrounding countries yet to negotiate a trade deal with the US.
Brent crude futures lost 71 cents or 0.97 per cent to $72.53 a barrel and the US West Texas Intermediate (WTI) crude futures for September depreciated by 74 cents or 1.06 per cent to $69.26 per barrel.
The major focus was on trade deals on Thursday as countries that haven’t negotiated a trade deal or received a tariff letter from Mr Trump administration braced for the next step.
So far, the US has recorded deals with two-thirds of its top 18 trade partners.
President Trump on Thursday said he and Mexican President Claudia Sheinbaum had agreed to extend an existing trade deal between their countries for 90 days and to continue talks over that period with the goal of signing a new deal.
Market analysts pointed out that the tariffs are negative for oil demand as it could stoke inflation.
US inflation increased in June as tariffs boosted prices for imported goods such as household furniture and recreation products.
This development supports views that price pressures would pick up in the second half of the year and delay the Federal Reserve from cutting interest rates until at least October. Lower interest rates reduce consumer borrowing costs and can boost economic growth and demand for oil.
In midweek, US crude oil inventories rose by 7.7 million barrels to 426.7 million barrels in the week ending July 25, driven by lower exports, the EIA said on Wednesday. Gasoline (petrol) stocks fell by 2.7 million barrels to 228.4 million barrels.
The threat of US sanctions on Russia helped support oil prices this week with President Trump said he would start imposing measures on Russia.
These include slamming a 100 per cent secondary tariffs on its trading partners, if it did not make progress on ending the war in Ukraine within 10-12 days, moving up an earlier 50-day deadline.
The US has also warned China, the largest buyer of Russian oil, that it could face huge tariffs if it continued its purchases.
The US Treasury Department also announced fresh sanctions on more than 115 Iran-linked individuals, entities, and vessels, stepping up the Trump administration’s maximum pressure campaign after bombing Iranian nuclear sites in June.