Key Developments in the Oil Market
On Friday, oil futures dipped slightly due to mixed economic news from the United States and concerns over crude supply following the European Union’s sanctions against Russia for its war in Ukraine.
- Brent crude futures: Fell 24 cents to $69.28 per barrel.
- West Texas Intermediate (WTI) futures: Dropped 20 cents to $67.34 per barrel.
This resulted in both benchmark contracts losing around 2% for the week.
US Economic Indicators
In the United States, housing starts for single-family homes fell to their lowest level in 11 months in June, as high mortgage rates and economic uncertainty hampered home purchases. This suggests that residential investment contracted again in the second quarter.
However, another report indicated that US consumer confidence improved in July, while expectations for inflation continued to decline.
Lower inflation should make it easier for the Federal Reserve to reduce interest rates, potentially lowering consumer borrowing costs and stimulating economic growth and oil demand.
US Trade Policy
President Donald Trump is pushing for a minimum 15% to 20% tariff in any deal with the European Union, according to a report by the Financial Times on Friday. The Trump administration now considers a reciprocal rate above 10%, even if an agreement is reached.
“The currently planned reciprocal tariffs, along with the sectoral measures announced, could push the effective US tariff rate above 25%, surpassing the highs of the 1930s,” noted Citi Research analysts from Citigroup.
In the coming months, tariffs are expected to reflect more in inflation, which could raise consumer prices and weaken economic growth and oil demand.
EU Sanctions on Russia
The European Union reached an agreement on the 18th package of sanctions against Russia for its war in Ukraine, which includes measures aimed at further hitting Russia’s oil and energy industries.