Oil prices held steady in Asian trading on Thursday, erasing early gains, as concerns over weakening demand in China outweighed recent geopolitical supply risks driven by former U.S. President Donald Trump’s aggressive trade rhetoric.
Crude markets initially rose for a third straight session on the back of fears that global oil supply may tighten. Trump’s threats to impose harsh tariffs on nations purchasing Russian crude had fueled this rally. But the momentum faded as soft economic data from China renewed worries over faltering demand.
A sharp rise in the U.S. dollar also dampened sentiment. The dollar strengthened after the Federal Reserve kept interest rates unchanged and refrained from committing to any cuts in the near term, further pressuring oil by making it costlier for holders of other currencies.
As of 21:34 ET (01:34 GMT), Brent crude for September delivery remained flat at $73.26 per barrel, while U.S. benchmark WTI crude edged up to $70.10 per barrel. Both contracts had climbed around 0.3% earlier before retreating.
China’s PMI Slump Fuels Demand Concerns
The release of disappointing purchasing managers index (PMI) data from China cast a shadow over oil markets. Manufacturing activity in July contracted more than forecast, as businesses faced disruptions from severe weather and ongoing U.S. tariffs. Non-manufacturing PMI also underperformed, suggesting that China’s services sector is struggling to maintain momentum.
The slowdown reinforced fears that the recovery in the world’s top crude importer is stalling, which could limit near-term demand growth. While earlier stimulus measures provided some support, Thursday’s figures suggest their impact may be waning. China’s Politburo this week signaled plans for further stimulus, acknowledging the need for additional economic support.
Trump Targets Russian Oil Buyers with Trade Threats
The main driver behind oil’s earlier strength this week was renewed political tension. Trump announced new plans to impose secondary sanctions on countries that continue buying Russian oil, aiming to choke off a key revenue stream for Moscow amid its war with Ukraine.
Specifically, Trump pledged 100% tariffs on those nations, naming China and India—Russia’s top oil customers—as likely targets. He added that India will face a 25% duty on all exports to the U.S., along with further unspecified penalties, beginning August 1.
Trump also issued a direct warning to China regarding its purchases of Russian energy products.
In parallel, Washington introduced new sanctions targeting companies involved in Iran’s oil trade. As both Russia and Iran are significant global suppliers, additional restrictions raise the risk of reduced market availability, heightening supply-side fears.
Inventories Add to Market Jitters
Meanwhile, U.S. inventory data added another twist. While gasoline stockpiles declined, crude inventories posted a surprise jump, raising questions about near-term demand trends.
Traders are now weighing whether weaker demand in Asia might cancel out the impact of supply threats from sanctions and tariffs. With mixed signals emerging across global markets, crude appears poised for more volatility in the days ahead.
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