US Tariff Uncertainty and OPEC+ Output Plans Weigh on Oil Market Sentiment

Oil prices edged lower Thursday as the market focused on the July 9 expiration of a 90-day US tariff suspension. The risk of higher tariffs remains significant, as several major trading partners, including the European Union and Japan, have yet to finalize new agreements. This uncertainty is fueling concerns about a potential slowdown in global economic activity and oil demand.

The possibility of tariffs being reinstated has added volatility to oil trading, with investors weighing the impact on fuel consumption and trade flows. Recent gains driven by geopolitical tensions, such as Iran’s suspension of cooperation with the UN nuclear watchdog, have been offset by these persistent trade policy risks.

OPEC+ Output Hike Expected as Inventories Build

OPEC+ is widely expected to approve an increase in oil production of 411,000 barrels per day at its upcoming policy meeting. This anticipated supply boost comes as US crude inventories unexpectedly rose by 3.8 million barrels last week, defying analyst expectations of a drawdown.

The combination of higher OPEC+ output and rising US stocks is weighing on prices, with traders wary of a potential oversupply. Many OPEC members are signaling a strategic shift toward maximizing revenue, even as demand growth shows signs of slowing.

Did you know?
The US Energy Information Administration reported a surprise 3.8 million barrel build in domestic crude inventories last week, when analysts had expected a drawdown of 1.8 million barrels.

China’s Slowing Services Sector and US Inventory Build Add to Bearish Sentiment

A private-sector survey revealed that China’s service sector expanded at its slowest pace in nine months during June, reflecting weaker domestic demand and a decline in new export orders. As the world’s largest oil importer, China’s economic health is critical to global energy markets.

Meanwhile, US gasoline demand has softened, and a surprise inventory build has heightened concerns about consumption during the peak summer driving season. These factors are compounding the negative outlook for oil prices in the near term.

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Analysts Forecast Lower Oil Prices for 2025

Industry analysts project that Brent crude could drop to $55-60 per barrel by December 2025, citing weak demand, tariff risks, and OPEC+’s supply strategy. US energy executives expect West Texas Intermediate crude to end the year near $68 a barrel, reflecting a cautious outlook amid ongoing volatility.

The consensus is that unless OPEC+ takes aggressive action to defend prices, oil markets are likely to remain soft through year-end. Any deviation from this strategy by the cartel could quickly alter the outlook.

Market Volatility Expected to Persist

With multiple factors converging, tariff uncertainty, rising supply, and signs of demand weakness, oil markets are poised for continued volatility. Lower prices may benefit consumers but could squeeze producers and oilfield service firms, many of whom are already scaling back drilling plans due to higher input costs and weaker margins.

The next few weeks will be critical as policymakers and producers navigate a shifting landscape, with global trade policy and OPEC+ decisions likely to set the tone for the remainder of 2025.