Brent crude gains following US-EU trade agreement

The front-month ICE Brent contract has gained by $1.39/bbl on the day, to trade at $70.48/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

The Donald Trump-led US government and the European Union (EU) reached a trade deal yesterday. This news has supported Brent futures as market participants weighed the broader implications of the agreement.

The deal imposes a 15% tariff on most EU goods, Reuters reports. It has helped avert a broader trade conflict between the two trade partners, which could have dampened the outlook for global oil demand, according to market analysts.

“A trade deal between the US and EU proved positive for sentiment this morning in the oil market,” said two analysts from ING Bank.

Oil prices have gained further support following recent comments by US President Donald Trump, suggesting a shortened deadline for Russia to resolve the Ukraine conflict.

Trump had previously threatened to impose 100% tariffs on countries trading with Russia. If imposed, the secondary tariffs could change the oil supply outlook for this year, according to market analysts.

“Trump’s comments reignited fears that Russia’s oil flows would be impacted,” remarked ANZ Bank’s senior commodity strategist Daniel Hynes.

Downward pressure:

Brent’s price gains were partially capped amid expectations that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will further boost supply in the upcoming months.

Market participants are awaiting the outcome of the OPEC+ meeting scheduled for 3 August, where the Saudi Arabia-led group is expected to discuss September production levels.

“Attention will likely turn to OPEC+ output policy”, ING Bank’s analysts added.

By Aparupa Mazumder

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