Oil Prices Remain Steady Amidst Intensifying Trade Negotiations

Oil prices remain steady despite two consecutive declines, as trade negotiations between the US and its partners intensify ahead of the August 1 deadline. US-China talks may include discussions on Beijing's oil purchases from Russia and Iran, potentially hindering progress. The trade war and OPEC+ production increases have contributed to a 6% decline in oil prices this year.

Oil prices remained relatively stable on Monday, July 21, despite a 0.2% drop in Brent crude futures to $69.16 a barrel and a flat U.S. West Texas Intermediate crude at $67.34. The market's resilience can be attributed to expectations that recent European sanctions targeting Russian crude supply will have minimal impact on oil balances [1].

The European Union approved the 18th package of sanctions against Russia over the war in Ukraine, which also targeted India's Nayara Energy. The sanctions include a ban on refined oil products processed from Russian oil in third countries, though enforcement could prove challenging [1]. Meanwhile, Iran is set to hold nuclear talks with Britain, France, and Germany, which could influence oil market dynamics [1].

In the U.S., the number of operating oil rigs fell by two to 422 last week, the lowest total since September 2021, as Baker Hughes reported [1]. U.S. tariffs on EU imports are set to kick in on August 1, which could influence oil demand [1]. Additionally, the European Commission is preparing to target $84.1 billion worth of U.S. goods for possible tariffs if trade talks fail [2].

Oil prices have seesawed in a tight range, as signs of steady demand from an increase in travel during the Northern Hemisphere summer have competed with concerns that U.S. tariffs on trading partners will slow economic growth and fuel consumption [2]. Chinese state-owned refiners are ramping up production to meet higher third-quarter fuel demand, which has limited losses in oil prices [2].

The outlook for larger crude exports from Iraq may boost global oil supplies and is weighing on prices. Expectations for increased Iraqi crude exports may also prompt Saudi Arabia to boost its crude exports to maintain its market share, further exacerbating a global oil supply glut [3]. OPEC+ is boosting output to reverse a 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026 [3].

Oil prices have carryover support from last Friday when the European Union approved fresh sanctions on Russian crude exports and its energy trade over its war in Ukraine [3]. The sanctions package includes cutting off 20 more Russian banks from the international payments system SWIFT, as well as restrictions imposed on Russian petroleum refined in other countries [3].

Despite these factors, oil prices have remained relatively stable, with Brent crude futures trading between a low of $66.34 a barrel and a high of $71.53 after a ceasefire deal on June 24 halted the 12-day Israel-Iran war [1].

References:
[1] https://www.reuters.com/business/energy/oil-prices-hold-steady-expected-minimal-sanctions-impact-2025-07-21/
[2] https://www.marketscreener.com/quote/index/S-P-GSCI-PETROLEUM-INDEX-46869201/news/Oil-prices-steady-as-investors-weigh-trade-war-impact-50518709/
[3] https://finance.yahoo.com/news/crude-oil-prices-slip-concerns-191825518.html