Oil futures sank as the escalating global trade war and the possibility that OPEC+ may halt output hikes flashed warning signs for energy demand.
West Texas Intermediate futures fell to settle below $67 a barrel after Bloomberg reported that the cartel is discussing a pause in further production increases from October. The early-stage deliberations are taking place as President Donald Trump unveils a new round of tariffs, including a 50% rate on Brazil, which sends some oil to the US.
Traders are probably interpreting the OPEC+ talks as a sign that “the market may not be able to cope with more oil,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “We are potentially seeing the risk of an oversupplied market” once the peak demand period ends, he said.
The US-led tariff war has intensified in recent days, and Trump’s latest salvo of demands has overshadowed earlier deals with major trade partners including China and the UK, which had served to mollify investors. Now, the market is facing some of the highest tariff rates in US history, setting the stage for an uncertain period for global growth.
Oil has edged higher this week even after OPEC+ decided over the weekend to raise output by more than expected in August. Energy Aspects said it expects global oil demand to rise by less than 1 million barrels a day in the third and fourth quarters amid pressure from US tariff policies.
Director of Market Intelligence Amrita Sen said the consultant was “worried about the fourth quarter and into 2026 because tariff talks are back.”
Timespreads also show that perceptions of strength in physical market are waning. While WTI’s prompt spread — the gap between its two nearest contracts — is still in a bullish, backwardated structure, the differential narrowed to $1.25 from as high as $1.57 earlier this week.
Meanwhile, Houthi attacks in the Red Sea have sunk two cargo vessels and left multiple crew members dead. The escalation has notably failed to inject a risk premium into oil prices, with investors reluctant to buy on geopolitical developments after a standoff between the US and Iran spared energy infrastructure.
Oil Prices
WTI for August delivery dropped 2.6% to settle at $66.57 a barrel in New York.
Brent for September settlement fell 2.2% to $68.64 a barrel.
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