Morning Highlights: Oil slips as tariff worries and OPEC+ output plans weigh on sentiment

Tuesday, July 8, 2025

Oil prices retreated on Tuesday, giving back some of the previous session’s gains, as traders weighed the impact of U.S. tariff uncertainty and a larger-than-expected OPEC+ supply increase coming in August.

Market snapshot (as of 6:15 EST):

• Brent (September): $69.40 (▼$0.18)

• WTI (August): $67.60 (▼$0.33)

Both benchmarks had rallied nearly 2% on Monday, supported by tight middle distillate markets and geopolitical jitters, but sentiment turned more cautious overnight.

________________________________________

Tariffs deadline clouds demand outlook

U.S. President Donald Trump began formally notifying trade partners on Monday that sharply higher tariffs will take effect August 1. Though he later said the date was not “100% firm,” the warnings have injected fresh uncertainty into the market.

“Tariffs have raised concerns about global growth and oil demand,” said analysts at ING in a note. Traders fear a return to aggressive tariffs could dampen economic activity just as OPEC+ supply grows.

________________________________________

OPEC+ output hikes exceed expectations

Saturday’s OPEC+ meeting concluded with the group agreeing to increase production by 548,000 barrels per day in August, surpassing the 411,000 bpd monthly hikes announced earlier in the year.

According to RBC Capital, the decision brings back nearly 80% of the 2.2 million bpd of voluntary cuts implemented by eight core producers in 2023.

Sources told Reuters the group is likely to approve an additional 550,000 bpd increase in September, which would fully unwind the 2023 cuts.

HSBC analysts warned that once summer demand begins to fade, these higher exports will “hit the market,” raising downside risks for prices into late Q3 and Q4.

________________________________________

Refined products and geopolitical risks provide some support

Despite broader concerns about oversupply, tightness in the middle distillate market and continued attacks by Yemen’s Houthis on Red Sea shipping lanes have offered near-term support.

“Offsetting concerns over potential oversupply was a tight middle distillates market and Houthi attacks on cargo ships,” said PVM Oil Associates analyst Tamas Varga.

________________________________________

Speculators remain constructive on crude

CFTC data released Monday showed money managers raised net-long positions in crude futures and options in the week to July 1, reflecting bullish positioning ahead of the U.S. peak summer driving season.

However, some analysts see positioning as vulnerable if tariffs take effect and inventories build later this quarter.

________________________________________

Outlook: watch for further policy clarity

With the next OPEC+ meeting scheduled for August 3 and the U.S. tariff deadline approaching August 1, traders are bracing for volatility.

“Once oil demand declines seasonally, the increase in OPEC+ exports will hit the market,” HSBC said.

In the near term, the market’s direction may hinge on:

• Whether Trump delays or enforces the new tariffs.

• Fresh U.S. macro data this week that could shape Fed policy expectations.

• Signals from OPEC+ ministers about September supply plans.