Tariff deadline looms
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Tariff deadline looms
Japan trade deal, progress in US/EU talks cheer oil bulls
Steve Sutherlin Petroleum News
Crude futures saw scant price movement July 23 as the looming threat of a U.S.-imposed Aug. 1 deadline for trading partners to make a deal or face punitive tariff levels was blunted by a new U.S./Japan trade deal together with constructive developments in U.S./European Union talks.
West Texas Intermediate crude closed 6 cents lower July 23 at $65.25 per barrel, while Brent fell 8 cents to close at $68.51 a barrel.
"Buying was driven by optimism that progress in tariff negotiations with the U.S. would help avoid a worst-case scenario," Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment told Reuters.
"Still, uncertainty over U.S.-China trade talks and peace negotiations between Ukraine and Russia is limiting further gains," Kikukawa said, adding that WTI will likely remain range-bound between $60 and $70.
Prices were further bolstered by a larger than forecast drawdown of U.S. commercial crude inventories, which helped to send futures higher in early Asian trade July 24.
In addition, the U.S. dollar index fell to its lowest level in more than two weeks, supporting oil prices by making it cheaper for non-dollar holders.
As Petroleum News went to press July 24, WTI was up 82 cents to $66.07 and Brent was up 73 cents to $69.24.
On July 22 crude prices dove on tariff fears, taking Alaska North Slope crude down $1.04 to close at $71.84, as WTI plunged 99 cents to close at $66.21 and Brent fell 40 cents to close at $68.59.
U.S./European Union talks were progressing to a deal for 15% tariffs on most products, Bloomberg reported July 23, quoting diplomats briefed on the negotiations.
European member states appear ready to accept the 15% tariff and EU officials are pushing to have it cover sectors including cars, while steel and aluminum imports above a certain quota would have a 50% duty, Bloomberg said, adding that the EU is optimistic but cautious as the final deal must be approved by U.S. President Donald Trump.
If no deal is reached in time and Trump imposes a threatened 30% tariff level, the EU said it is "prepared to strike back hard."
Trump's deal with Japan would reduce tariffs on Japanese autos to 15% from 27.5%, and cut other duties due on Aug. 1 to 15%, Reuters reported July 23. The deal includes a $550 billion package for Japanese investment in the United States.
Crude inventories stage surprise drawdown U.S. commercial crude oil inventories for the week ended July 18 fell by 3.2 million barrels from the previous week to 419 million barrels -- 9% below the five-year average for the season, the U.S. Energy information Administration said in its weekly petroleum report July 23.
Analysts answering a Reuters poll had called for a drawdown of 1.6 million barrels.
Total motor gasoline inventories decreased by 1.7 million barrels for the week to 231.1 million barrels -- just clearing the five-year average for this time of year, the EIA said.
Analysts in the Reuters poll had projected a 900,000-barrel drawdown.
Distillate fuel inventories increased by 2.9 million barrels for the week to 109.9 million barrels -- 19% below the five-year average for the time of year, the EIA said.
Peace talks between Russia and Ukraine were held in Istanbul July 23, focusing on prisoner exchanges.
A breakthrough on a ceasefire or a direct summit between leaders appears distant, according to Reuters reports.
Oil exports from Russia's main Black Sea ports were temporarily disrupted July 23. Industry sources told Reuters that new regulations effectively halted shipments from Kazakhstan via a key export consortium which includes American energy firms.
Washington may impose fresh sanctions on Russian oil to bring the Ukraine war to an end. The EU adopted a new sanctions package July 18, which includes lowering the price cap for Russian crude exports.
ANS fell 11 cents July 21 to close at $72.88, as WTI fell 14 cents to close at $67.20 and Brent dropped 29 cents to close at $68.99.
On July 18, ANS fell 19 cents to close at $72.99, WTI fell 20 cents to close at $67.34 and Brent fell 24 cents to close at $69.28.
On July 17, crude surged as demand fears eased on a robust summer travel season and bullish economic reports put up by the United States and China. ANS leapt $1.31 to close at $73.18, WTI leapt $1.16 to close at $67.54, and Brent jumped a dollar to close at $69.52.
ANS dropped 55 cents July 16 to close at $71.87, as WTI fell 14 cents to close at $66.38 and Brent fell 19 cents to close at $68.52.
ANS fell 58 cents over the trading week from its close of $72.42 July 15 to $71.84 July 22.
On July 22, ANS closed at a premium of $5.63 over WTI, and at a premium of $3.25 over Brent.
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