Oil prices ease from two-week highs as markets await clarity on US tariffs

Oil prices edged lower on Wednesday, retreating slightly from their strongest levels in two weeks, as investors weighed the uncertainty surrounding US trade policy and its potential impact on global demand.

Investors cautious ahead of new tariff deadline

After a rally earlier in the week, traders hit pause while they monitored US President Donald Trump’s intensifying tariff rhetoric. According to Reuters, Brent crude futures fell 20 cents, or 0.3 per cent, to $69.95 a barrel in early Wednesday trade, while US West Texas Intermediate (WTI) crude slipped 21 cents, or 0.4 per cent, to $68.12.

Markets had been buoyed by hopes of resilient demand but turned cautious as Trump shifted his approach yet again. On Tuesday, the President pushed back a tariff deadline to 1 August, a date he described as “final,” insisting “no extensions will be granted,” as per Reuters.

This delay offered some hope to major US trade partners such as Japan, South Korea, and the European Union that last-minute deals might ease the threatened duties. But it left other exporters, including South Africa, uncertain about their trading terms and wary of sudden policy shifts.

Trump’s widening trade war rattles markets

Trump’s tariff campaign is unsettling commodities markets well beyond oil. On Tuesday, he confirmed plans to impose a 50 per cent tariff on imported copper, a critical input for industries from electric vehicles to power grids. He also signalled that long-threatened tariffs on semiconductors and pharmaceuticals would soon follow, further broadening the trade conflict.

According to Reuters, traders are worried that the escalating trade war could weigh on global economic growth and energy consumption by raising costs and disrupting supply chains.

Demand hopes buoyed by US travel surge

Despite these headwinds, some analysts see demand resilience in the near term. As per Reuters, strong travel demand around the 4th of July holiday weekend offered support to oil markets.

Data from travel group AAA projected a record 72.2 million Americans would journey more than 50 miles (80 kilometres) over the holiday period, a sign of robust consumer activity that traders hope will underpin fuel demand even as the tariff debate rages.

US oil production outlook softens

On the supply side, the US government has trimmed its expectations for domestic production next year. The Energy Information Administration (EIA) said on Tuesday it now projects 2025 US oil output at 13.37 million barrels per day, down slightly from last month’s forecast of 13.42 million barrels per day.

According to Reuters, this downgrade reflects weaker oil prices prompting US producers to slow drilling activity this year. For 2026, the EIA maintained its forecast at 13.37 million barrels per day.

OPEC+ weighs further output increases

Global supply dynamics are also evolving. OPEC+ producers are set to approve another significant output increase for September, building on their decision to add 548,000 barrels per day in August as they unwind voluntary cuts.

As per Reuters, five sources close to the talks said the group, including Saudi Arabia and the United Arab Emirates, is completing both the unwinding of cuts by eight members and accommodating the UAE’s higher quota. Yet analysts caution that the actual output boost so far has fallen short of the group’s official targets, with most new supply coming from Saudi Arabia.

Geopolitical risks keep floor under prices

Beyond trade tensions, geopolitical risks continue to lend support to oil markets by threatening supply security. According to Reuters, four seafarers were killed on Tuesday when a Liberian-flagged, Greek-operated bulk carrier was attacked with drones and speedboats off Yemen, the second such incident in a single day after months of relative calm.

This flare-up in tensions highlights the fragile security environment in key shipping lanes, which traders see as a reason for caution in betting on deeper price declines. As the world watches Washington’s next moves on tariffs, energy markets are bracing for further volatility, balancing hopes of steady demand against the risk of trade disruptions and geopolitical shocks.