Morning Highlights: Oil retreats as tariff uncertainty and OPEC+ supply loom

Thursday, July 3, 2025

Oil prices slipped on Thursday, giving back part of Wednesday’s gains, as investors turned cautious ahead of next week’s U.S. tariff deadline and the anticipated OPEC+ production hike. A surprise build in U.S. crude stocks and fresh signs of slower demand growth in China added to the bearish mood.

Market snapshot (as of 6:20 EST):

• Brent (September): $68.86 (▼$0.25)

• WTI (August): $67.27 (▼$0.18)

Both benchmarks had risen around 3% on Wednesday after Iran suspended cooperation with the U.N. nuclear watchdog, but the rally faded as market focus shifted back to fundamentals and trade policy risks.

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Tariff deadline fuels demand anxiety

Investors are bracing for July 9, when the 90-day pause on President Trump’s higher tariffs expires. Without new trade deals, tariffs on imports from major partners including the EU and Japan could revert to levels as high as 50%.

“Market participants will probably not want to carry too much risk into the long U.S. weekend,” ING analysts said, noting that a return to aggressive tariffs could dampen global growth and oil demand.

Trade talks made some progress, with the U.S. and Vietnam reaching a preliminary agreement, but broader uncertainty persists.

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OPEC+ poised to raise production again

Meanwhile, OPEC+ is widely expected to approve a 411,000 bpd output increase for August at its July 6 meeting. This would mark the fourth consecutive monthly hike as the group continues to unwind its 2023 voluntary cuts.

• If confirmed, OPEC+ will have returned nearly 1.8 million bpd to the market this year.

• Standard Chartered forecasts a final 411,000 bpd hike in September, fully reversing the earlier 2.2 million bpd cuts.

So far, markets have absorbed the increases without strain. Inventories remain low and the prompt market is still in backwardation—though analysts caution the supply picture could turn bearish if demand softens into year-end.

“We do expect room for one more month of accelerated unwinding basis balances and structure,” said Energy Aspects analyst Richard Bronze.

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U.S. stock builds, China slowdown weigh on sentiment

Fresh supply concerns came from Wednesday’s EIA report, which showed:

• U.S. crude inventories rose by 3.8 million barrels last week—vs. expectations for a 1.8 million barrel draw.

• Weekly gasoline demand dropped to 8.6 million bpd, fueling concern about summer driving season consumption.

A private-sector survey on Thursday also showed China’s services activity slowed to a 9-month low in June amid weaker demand and falling new export orders. This added to worries about oil demand from the world’s largest importer.

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Longer-term outlook remains constructive despite near-term risks

Despite current softness, many analysts still expect balances to tighten later in Q3:

• Standard Chartered forecasts a 0.9 million bpd global stock draw in Q3, driven by a seasonal demand increase.

• Non-OPEC+ output is expected to stay largely flat, while compliance issues—especially in Kazakhstan—could complicate the outlook if demand weakens in Q4.

“Thankfully, the rapid unwinding of the cuts has proved to be a highly successful strategy,” StanChart analysts wrote, noting inventories remain near multi-year lows.