Global Oil Prices Flat As US–Japan Pact Eases Tensions, EU–China Summit Looms

Oil prices held largely steady on Wednesday, pausing a three-day losing streak, after the announcement of a trade agreement between the United States and Japan. The development provided a degree of relief to investors amid an otherwise tense global trade environment.

Around 12:30 PM, Brent crude futures dipped marginally by 2 cents to trade at $68.57 per barrel, while US West Texas Intermediate (WTI) crude futures also inched down by 2 cents to $65.29 per barrel.

The small movements followed a decline of nearly 1 per cent in the previous session, driven by growing unease over ongoing trade tensions and possible retaliatory actions by the European Union, reported Reuters.

The market had been rattled after the European Union signalled it may pursue countermeasures against US tariffs, dampening expectations for a breakthrough in negotiations ahead of the August 1 deadline. However, some optimism returned after US President Donald Trump confirmed a trade deal with Japan, which includes a 15 per cent tariff on US imports and an agreement by Japan to invest $550 billion in the US economy.

Sentiment Remains Cautious as Broader Trade Tensions Persist

Despite the US–Japan development, analysts remain cautious, pointing out that uncertainty persists due to stalled negotiations between the US, the EU, and China.

"The slide (in prices) of the past three sessions appears to have abated but I don’t expect much of an upward impetus from news of the US-Japan trade deal as the hurdles and delays being reported in talks with the EU and China will remain a drag on sentiment," noted Vandana Hari, founder of oil market analysis firm Vanda Insights.

Ahead of Thursday’s EU–China summit, hopes remain subdued, with both parties facing unresolved issues. China's commerce ministry said its commerce minister and the EU trade commissioner had a “candid and in-depth” exchange on economic and trade matters.

Also Read : US-Japan Strike 'Massive' Trade Pact As Trump Cuts Tariffs To 15%

Inventory Data Offers Modest Support to Oil Markets

Adding to the complex market outlook, the American Petroleum Institute (API) reported a decline in US crude oil and gasoline inventories last week, providing some support to prices. However, distillate stocks were said to have risen by 3.48 million barrels.

“This will offer some relief to the middle distillate market, which has been looking increasingly tight,” analysts at ING said, suggesting that current low crude stocks may help keep a floor under prices, even as oversupply concerns linger.

In a separate development, US Energy Secretary Jennifer Granholm hinted that the United States could impose sanctions on Russian oil as part of efforts to end the war in Ukraine. This followed the European Union’s approval of its 18th sanctions package against Russia, which includes a reduction in the price cap for Russian crude. Analysts, however, cautioned that without US participation, the effectiveness of the new EU sanctions could be limited.

As geopolitical uncertainty and trade dynamics continue to shape global oil markets, investors remain watchful for any fresh signals that could sway sentiment.

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