Oil Market Analysis: Trends in Tariffs and Trade

Recap: The oil market on Tuesday rallied sharply higher after the U.S. Treasury Secretary said China could see high tariffs if it continues to buy Russian oil. The market posted a low of $66.53 in overnight trading before it continued to trend higher as concerns over a trade war between the U.S. and its trading partners was abating after the U.S. and European Union signed a trade framework on Sunday. The market was further supported as U.S. President Donald Trump increased pressure on Russia to end the war in Ukraine. President Trump said he would begin imposing tariffs and other measures on Russia in ten days if Russia did not make progress in ending the war in Ukraine. The market extended its gains to over $2.70 and retraced more than 50% of its move from a high of $75.95 to a low of $62.84 as it rallied to a high of $69.76 on the news of U.S. Treasury Secretary’s warning to China. The September WTI contract settled up $2.50 to $69.21 and the September Brent contract settled up $2.47 at $72.51. The product markets ended the session higher, with the heating oil market settling up 3.72 cents at $2.4638 and the RB market settling up 8.32 cents at $2.2184.

Technical Analysis: The crude market will likely continue to trend higher as the market focuses on President Trump’s statement that the U.S. will begin imposing tariffs and other measures on Russia in ten days. The market will also be driven by the weekly petroleum stocks reports, which are expected to show draws in crude stocks of over 1 million barrels. The crude market is seen finding resistance at $69.76, $70.96, $73.70 and $75.98. Meanwhile, support is seen at $66.53, $65.05-$65.00, $64.71, $64.38, $64.10 and $63.93.

Fundamental News: U.S. President Donald Trump said that he was not seeking a summit with Chinese President Xi Jinping, but added that he may visit China at Xi’s invitation, which President Trump said had been extended.

China’s top trade negotiator, Li Chenggang, said China and the United States will push for the continued pause of U.S. reciprocal tariffs on Chinese goods as well as China’s countermeasures. He said during their negotiations on Monday and Tuesday, the two sides reviewed the consensus reached in previous rounds of trade talks in Geneva and London. He said the two sides will continue to maintain communication and have “timely exchanges” on trade and economic issues.

U.S. Commerce Secretary, Howard Lutnick, said U.S. President Donald Trump will make his trade deal decisions this week even as separate negotiations with China and the European Union continue, ahead of President Trump’s August 1^st deadline.

Kuwait’s Oil Minister, Tariq Suleiman Al-Roumi, said he was optimistic about the oil market’s fundamentals and that OPEC+ efforts aim for market balance.

The Environmental Protection Agency will rescind the long-standing finding that greenhouse gas emissions endanger human health, as well as tailpipe emission standards for vehicles.

The American Fuel and Petrochemical Manufacturers criticized the Trump administration’s biofuel policies in a letter to top Republican lawmakers. The letter also reflects a growing divide between U.S. oil producers and refiners, an alliance that has fractured in recent years over biofuels policy. The letter said current energy policies will negatively affect U.S. oil refiners, consumers and President Donald Trump’s “energy dominance agenda.” The letter said the EPA’s recent proposal to increase the amount of biofuels that oil refiners must blend into their fuel mix will put compliance costs around the federal rule near $70 billion. A new section in the proposal that reduces the value of imported biofuel feedstocks also will raise compliance costs. The letter also criticized the EPA’s handling of waivers for small refiners that exempt them from the biofuel blending obligations; the EPA’s decision to allow temporary nationwide summertime sales of gasoline with a higher ethanol content; and tariffs on imported renewable feedstocks.

Early Market Call – as of 8:40 AM EDT

WTI – Sep $69.58, up 33 cents

RBOB – Aug $2.2229, up 27 points

HO – Aug $2.4205, down 3.11 cents

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