Oil markets began the week on a cautious note as European Union (EU) sanctions targeting Russian energy exports came into force, triggering a modest decline in crude prices. The move coincided with uncertainty surrounding international trade negotiations ahead of the impending August 1 U.S. tariff deadline.
Crude oil benchmarks remained range-bound, with prices hovering near $70 per barrel across global indices. The downward trend reflects the combined weight of escalating trade tensions, tepid global economic growth projections, and evolving geopolitical developments.
Brent crude futures fell by approximately 0.11% to $68.52 per barrel, down from $68.60 at the prior close. Meanwhile, the U.S. benchmark, West Texas Intermediate (WTI), declined 0.19%, trading at $65.87 per barrel, compared to its previous level of $66.
On Friday, the EU finalized its 18th sanctions package, directly targeting revenue streams from Russian oil. This latest round includes a reduction of the oil price cap from $60 to $47.60 per barrel and introduces a dynamic pricing mechanism to adapt to global market conditions.
Additionally, the sanctions blacklisted 105 more vessels involved in Russia’s so-called “shadow fleet,” bringing the total number of restricted ships to 444. These include international oil traders, shadow operators, and even an Indian refinery with ties to Russian oil giant Rosneft.
A separate import ban now prohibits refined petroleum products manufactured using Russian crude, even when processed through intermediary nations—excluding the U.S., UK, Canada, Norway, and Switzerland. The Czech Republic also lost its exemption for Russian crude imports under the new measures.
The global oil market is closely watching for disruptions to supply resulting from these restrictions.
In related developments, former U.S. President Donald Trump recently announced that he may impose 100% secondary sanctions on Russia if a ceasefire in Ukraine is not brokered within the next 50 days. NATO Secretary-General Mark Rutte, after meeting with Trump, warned nations like China, Brazil, and India of the risks of maintaining commercial ties with Moscow, cautioning that the U.S. could enforce retaliatory tariffs against them.
Meanwhile, diplomatic channels are stirring again as Iran confirmed plans to resume nuclear negotiations with France, the UK, and Germany in Istanbul on July 25. This has raised expectations that sanctions might ease, increasing global oil supply and potentially exerting further downward pressure on prices.
Traders are also wary of upcoming U.S. trade policy decisions. Trump is reportedly pushing for new 15%-20% tariffs on the EU, and just last week, he unveiled a sweeping 30% tariff on all EU imports, effective from August 1. These developments have further unsettled investor confidence.
The demand side of the oil equation also remains shaky. Despite OPEC’s latest forecast projecting a 1.3 million barrels per day (bpd) increase in 2025, bringing total demand to 105.13 million bpd, its June report revealed rising production figures. OPEC alone added 220,000 bpd, while the broader OPEC+ bloc increased output by 349,000 bpd, reaching 41.56 million bpd in total.
This rise in supply, coupled with cautious demand growth, has heightened expectations of a looming market surplus.
Adding to bearish sentiment, inflation data in the U.S. revealed that the Consumer Price Index (CPI) rose 2.7% in June—up from 2.4% in May—fueling speculation around potential Federal Reserve interest rate hikes. A stronger dollar tends to suppress oil demand globally by making purchases more expensive for holders of other currencies.
With OPEC+ increasing output and geopolitical friction rising, the global oil market faces a delicate balancing act in the weeks ahead.
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