Oil prices softened slightly on Wednesday following a surge to two-week highs, as investors recalibrated expectations amid growing unease around U.S. trade policy and anticipated inventory builds. With Brent crude hovering at $70.08 and WTI at $68.25 a barrel, the market remains on edge, oscillating between demand optimism and fears of global trade disruption.
President Donald Trump’s latest decision to push back the tariff deadline to August 1 has brought temporary relief to major partners like Japan, South Korea, and the EU, though smaller exporters remain in limbo. While the delay offers some breathing room, Trump’s rhetoric has turned increasingly aggressive, with threats to slap 50% tariffs on copper and introduce sweeping duties on pharmaceuticals and semiconductors.
These developments come at a critical juncture. The broader market is contending with inflation anxiety, a mixed economic outlook, and a Federal Reserve that remains on the sidelines. The Fed’s wait-and-see posture has been reinforced by strong June job data, which effectively rules out a rate cut this month. Treasury yields and the U.S. dollar have climbed in response, making non-yielding assets like gold less appealing in the short term.
However, despite strength in the greenback, investor caution persists. Market participants remain unsure how the Fed will navigate the coming months, with many still pricing in rate cuts starting in October. Until there’s more clarity—particularly from upcoming FOMC minutes and Fed speeches—risk sentiment will remain fragile.
The oil market’s resilience in the face of mounting bearish signals has raised eyebrows. While strong U.S. travel demand during the Fourth of July weekend offered a brief bullish impulse, early estimates point to a 7.1 million barrel crude inventory build, adding to oversupply concerns. Unlock your trading potential with expert-led courses at MJFXM — your trusted partner in financial market education.
Trump’s unpredictability on trade and the ripple effects of a broader economic slowdown loom large. If tariff-driven cost pressures intensify, they could choke demand growth and fuel more volatility across energy and commodities markets. Until then, oil prices are caught in a tug-of-war between temporary demand strength and the potential for long-term economic drag.