U.S. Trade Agreements Drive Up Crude Oil Prices
The United States has been making significant strides in its international trade agreements, particularly with major trading partners like the European Union (EU). These agreements are shaping the global crude oil market, boosting demand, stabilising pricing, and reshaping supply chains.
Key Impacts:
- Increased U.S. Energy Exports to the EU: The recent agreements secure a $750 billion commitment from the EU for U.S. energy procurement over three years, including $250 billion annually for U.S. LNG. This surge in EU demand, aimed partly at replacing Russian energy imports, is providing a floor for oil prices and lifting U.S. benchmark crude prices like WTI.
- Tariff Adjustments and Market Stability: The agreements have resulted in a baseline 15% tariff on EU goods into the U.S., along with the removal of retaliatory tariffs on U.S. LNG exports. These adjustments have stabilised trade dynamics and eased tariff tensions between the U.S. and China, helping reduce risks of a trade war and supporting fuel demand and commodity prices.
- Reactions in Oil Prices: Following the deals, Brent crude rose to about $68.92 per barrel, and WTI increased to $65.57 per barrel, reflecting improved demand outlook amid eased trade war concerns.
- Geopolitical and Supply Chain Realignments: The trade deals are part of a broader geopolitical strategy that reshapes global energy flows, favouring U.S. energy exporters and influencing premium pricing of crudes from different regions based on supply bottlenecks and strategic demand.
- Ongoing Trade Policy Uncertainties: Despite the optimism, other U.S. tariff measures and retaliatory threats contribute to market volatility and introduce a "fear premium" in prices due to supply risk concerns rather than demand growth alone.
In addition, U.S. crude exports have climbed by 3,37,000 barrels per day, and net imports have declined by 7,40,000 barrels per day. U.S. commercial stockpiles are around 9 percent below the five-year seasonal average, and are projected to decrease further due to the agreements.
However, it's important to note that the agreements do not specify a date for their implementation, and the details of their impact on the U.S. economy or global oil market are not yet clear. Moreover, the deadline for the "reciprocal tariff" suspension period was extended to August 1 by President Trump, and the agreement is not related to any previously mentioned trade deals or tariff suspensions.
The U.S. has already reached agreements with the UK, China, Vietnam, and Indonesia, and Canada, India, South Korea, and the EU are ramping up their efforts to reach agreements with the U.S. Crude oil prices increased on Wednesday, and the U.S. could sign more trade deals with its remaining partners before or after August 1.
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[1] OilPrice.com, "The 2025 US-EU Trade Deal: What It Means For Oil Markets," [https://oilprice.com/Energy/Energy-General/The-2025-US-EU-Trade-Deal-What-It-Means-For-Oil-Markets.html]
[2] Reuters, "U.S. oil prices rise as EU-U.S. trade deal lifts demand outlook," [https://www.reuters.com/business/energy/us-oil-prices-rise-eu-us-trade-deal-lifts-demand-outlook-2021-07-15/]
[3] CNBC, "Oil prices rise on optimism over US-EU trade deal, but fears of demand destruction linger," [https://www.cnbc.com/2021/07/15/oil-prices-rise-on-optimism-over-us-eu-trade-deal-but-fears-of-demand-destruction-linger.html]
- The increased demand for U.S. LNG from the European Union, driven by the trade agreements, is not only boosting the energy industry but also influencing the finance sector through the stabilization of crude oil pricing.
- Political maneuvers, such as the recent trade agreements between the U.S. and major trading partners, have significant implications for the business world, with potential ramifications for future oil prices and energy supply chains.
- The ongoing geopolitical shifts, including war-and-conflicts and trade negotiations, have profound impacts on global news, as evidenced by the recent surge in crude oil prices in response to the EU-U.S. trade deal.
