Oil prices flattened in Thursday’s Asian session after early gains were erased by disappointing economic data from China, casting doubt over demand in the world’s largest crude importer. The bearish outlook from China offset growing concerns about tighter global supplies following aggressive policy moves from former U.S. President Donald Trump.
Crude was also weighed down by a resurgent U.S. dollar, which gained traction on Wednesday after the Federal Reserve chose to keep interest rates unchanged and provided no clear guidance on potential rate cuts. A stronger dollar tends to pressure commodity prices by making them more expensive for non-U.S. buyers.
Earlier in the week, oil prices had seen three consecutive days of gains, driven by expectations of constrained supply. Those expectations were fueled by Trump’s threats to slap heavy tariffs on countries that continue purchasing Russian oil. However, that upward momentum appeared to lose steam on Thursday.
U.S. crude inventory data released midweek showed a surprisingly large increase in overall stockpiles, although gasoline inventories declined, limiting some of the bearish sentiment.
As of 21:34 ET (01:34 GMT), Brent crude futures for September delivery were stable at $73.26 per barrel, while West Texas Intermediate (WTI) crude saw a marginal rise to $70.10. Both benchmarks had climbed as much as 0.3% earlier in the session.
China PMI Weakness Dampens Oil Rally
Oil bulls were dealt a blow after China posted weaker-than-expected purchasing managers index (PMI) figures for July, with both manufacturing and non-manufacturing activity showing signs of stagnation.
The manufacturing sector contracted more than anticipated, as extreme weather events and ongoing U.S. tariffs disrupted production. Meanwhile, non-manufacturing growth slowed considerably, with overall business activity barely inching forward during the month.
The data sparked renewed fears over China’s economic momentum and its near-term oil consumption outlook. Initial signs of recovery, spurred by Beijing’s earlier stimulus measures, appear to be fading. In response, China’s top policymakers this week hinted at further economic support in the coming months.
Trump Escalates Pressure on Russian Oil Trade
Earlier gains in oil prices this week had been largely driven by Trump’s vow to increase restrictions on Russian crude exports. In a recent statement, he announced plans to introduce 100% secondary tariffs on countries that continue buying oil from Russia, a move aimed at cutting off Moscow’s revenue streams as the war in Ukraine drags on.
Among the likely targets are China and India, two of the largest importers of Russian oil. Trump further declared that starting August 1, India would face 25% tariffs on all exports to the U.S., in addition to other unspecified penalties tied to its energy ties with Russia. He also issued a warning to China over its continued purchases of Russian oil.
Adding to the geopolitical tension, the U.S. government also imposed fresh sanctions on entities connected to Iran’s oil sector. With both Russia and Iran being major players in global crude supply, the mounting restrictions are raising concerns about tighter oil markets in the second half of the year.
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