Onome Amuge
Global oil benchmarks experienced a pullback on Friday, with prices falling by $2 a barrel. The retreat was largely driven by growing jitters over a potential increase in production by OPEC and its allies, coupled with a weaker-than-expected US jobs report that fanned worries about future demand.
Brent crude futures settled at $69.67 a barrel, marking a decline of $2.03, or 2.83 per cent. US West Texas Intermediate (WTI) crude, the American benchmark, finished at $67.33 a barrel, down $1.93, or 2.79 per cent. Despite Friday’s losses, both benchmarks still closed the week with substantial gains, with Brent up nearly six per cent and WTI rising 6.29 per cent.
“The market is highly sensitive to any signals from OPEC+ regarding supply adjustments,” noted Phil Flynn, a senior analyst with Price Futures Group. “While the week saw strong bullish momentum, the mere possibility of more barrels coming online is enough to prompt a significant price correction, especially when demand-side concerns emerge,”he added.
Adding to the demand-side anxieties, the latest US jobs report provided a disappointing reading. The US Labor Department reported that the country added 73,000 jobs in July, a figure significantly lower than economists’ forecasts. This pushed the national unemployment rate up to 4.2 per cent from 4.1 per cent in June, signalling a potential softening in the world’s largest economy and a major oil consumer.
“We can blame U.S. President Donald Trump with the tariffs or we can blame the Federal Reserve for not raising interest rates,” commented Flynn, reflecting a sentiment of exasperation among some market observers.
For much of the week, oil traders had been preoccupied with the potential impact of President Trump’s sweeping new US tariffs. On Thursday, President Trump signed an executive order imposing duties ranging from 10 per cent to 41 per cent on US imports from dozens of countries and foreign territories. These tariffs, which are largely set to take effect from Friday, target nations that failed to reach new trade agreements by his August 1 deadline, including major economic partners like Canada, India, and Taiwan. Conversely, partners such as the European Union, South Korea, Japan, and Great Britain managed to secure trade deals and avoid the steeper penalties.
“We think the resolution of trade deals to the satisfaction of the market – more or less, barring a few exceptions – has been the key driver for oil price bullishness in recent days,” explained Suvro Sarkar, an analyst at DBS Bank.
Beyond tariffs, the oil market has also been influenced by escalating geopolitical tensions, particularly President Trump’s threats to impose 100 per cent secondary tariffs on Russian crude buyers. This aggressive stance is part of a broader effort to pressure Russia into halting its ongoing war in Ukraine. The prospect of such penalties has stoked considerable concern over potential disruption to global oil trade flows and the removal of a significant volume of Russian crude from the market.
The interplay of supply-side concerns from OPEC+, a softening US demand outlook, and the unpredictable nature of US trade and geopolitical policy is creating a highly volatile environment for oil.
“Friday’s dip serves as a strong reminder that even in a week of significant gains, the market remains acutely sensitive to both fundamental shifts and political rhetoric,” stated Sarah Jones, a commodity strategist at a prominent investment bank in London.
Jones added, “The long-term impact of the US tariffs on global growth and, consequently, oil demand, is still being assessed. While some immediate trade resolutions might have offered fleeting comfort, the broader protectionist trend is a structural headwind for commodity markets.”
Concerns over Russian supply remain a wildcard. “The threat of secondary sanctions on Russian oil buyers, particularly involving China and India, is a major upside risk for prices,” commented Alexey Novikov, a Moscow-based energy consultant. “If a significant portion of Russian exports were to be displaced, even partially, it would create a supply crunch that OPEC+ would struggle to fully offset in the short term, pushing prices much higher. The market is pricing in some of this geopolitical risk, but the full impact is still uncertain,” Novikov added.
Looking ahead, analysts anticipate continued volatility. The OPEC+ meeting outcomes, further developments in US trade negotiations, and the evolution of the Russia-Ukraine conflict will be critical determinants of oil price movements in the coming weeks.
