Oil Price Decline: How Trump’s Tariff Outlook Could Impact Your Business in Oman
LONDON: Oil prices experienced a slight decline on Thursday as investors assessed the implications of US President Donald Trump’s tariffs on global economic growth. By 0904 GMT, Brent crude futures had fallen by 23 cents, or 0.3%, to $69.96 a barrel, while US West Texas Intermediate crude dropped 32 cents, or 0.5%, to $68.06 a barrel.
This decline followed Trump’s announcement of a potential 50% tariff on exports from Brazil, the largest economy in Latin America, amid a public disagreement with Brazilian President Luiz Inacio Lula da Silva. Additionally, Trump outlined plans for tariffs on copper, semiconductors, and pharmaceuticals, and his administration dispatched tariff notification letters to countries including the Philippines and Iraq. These actions complemented more than a dozen notices sent earlier to major US suppliers such as South Korea and Japan.
Harry Tchilinguirian, head of research at Onyx Capital Group, noted that Trump’s previous reversals on tariffs have moderated market reactions to such announcements. "People are largely in wait-and-see mode, given the erratic nature of policymaking and the flexibility the administration is showing around tariffs," he said.
Policymakers are expressing concerns regarding inflationary pressures stemming from these tariffs. Minutes from the Federal Reserve’s June 17–18 meeting indicated that only a few officials believed interest rates could be lowered in the near term. Higher interest rates typically raise borrowing costs, which in turn diminishes oil demand.
Despite the price dip, a weaker US dollar during trading in Asia supported oil prices. OANDA senior analyst Kelvin Wong explained that a declining dollar often leads to higher oil prices, as it makes oil cheaper for holders of other currencies.
According to the Energy Information Administration (EIA), US crude inventories increased while gasoline and distillate stocks decreased last week. Notably, gasoline demand surged by 6%, reaching 9.2 million barrels per day.
Global daily flights averaged 107,600 in the first eight days of July, marking an all-time high. In China, flights reached a five-month peak, and port and freight activities demonstrated continued growth in trade compared to the previous year, as noted in a report from JP Morgan.
The report stated, "Year to date, global oil demand growth is averaging 0.97 million barrels per day, in line with our forecast of 1 million barrels per day."
Skepticism remains about whether the recent increase in production quotas set by OPEC+ will translate into substantial output growth. Some member nations are already exceeding their quotas, while others, like Russia, are hindered by damaged oil infrastructure, according to Tony Sycamore, an analyst at IG.
As OPEC+ oil producers prepare to approve a significant output increase for September, they will conclude the rollback of voluntary production cuts by eight members, alongside the United Arab Emirates’ adjustment to a larger quota.
Special Analysis by Omanet | Navigate Oman’s Market
The decline in oil prices due to tariff uncertainties poses a risk for businesses in Oman, particularly in the energy sector, as it may lead to reduced profitability and investment. However, the sustained global demand growth for oil could create opportunities for local producers to capitalize on increasing consumption despite price fluctuations. Smart investors should consider diversifying their portfolios and closely monitoring geopolitical developments to mitigate risks while seizing potential new markets in an evolving landscape.
