Oil posts weekly gain as markets assess potential Russia sanctions and Trump tariffs

US President due to give major statement on Russia on Monday

Oil prices rose on Friday as the market considered potential US sanctions on oil-producer Russia and another round of tariff threats, with prices heading for a modest weekly gain.

Brent, the benchmark for two thirds of the world's oil, rose 2.5 per cent to settle at $70.36 a barrel. West Texas Intermediate, the gauge that tracks US crude, climbed 2.8 per cent to $68.45.

Brent posted a second weekly gain amid market tightness.

“All eyes now shift to what President Trump might announce on Russia on Monday, and considering Russia is a large energy producer, prices were supported today,” Giovanni Staunovo, a strategist at Swiss bank UBS, told The National.

“Sentiment at the Opec seminar [in Vienna this week] was positive regarding demand, but unresolved trade tensions remain a drag on economic activity and oil prices, but for now the oil market remains tight.”

Oil prices climbed after dropping more than 2 per cent a day earlier, amid uncertainty around US President Donald Trump's trade agenda and reports that the Opec+ alliance is considering one more output increase for September before a pause over concerns of a looming supply glut later in the year, analysts said.

“[Mr] Trump continued to escalate trade tensions, proposing blanket tariffs of up to 20 per cent on most trading partners and hinting at a forthcoming 'major statement' on Russia, fuelling concerns about the global economic outlook,” Soojin Kim, research analyst at MUFG Bank, said on Friday.

“These levies, set to take effect on August 1, come on top of country-specific duties and growing hostilities in the Red Sea, further unsettling the market.”

The market is weighing the planned announcement on Russia by Mr Trump that is expected on Monday. In an interview with NBC News, Mr Trump repeated his criticism of President Vladimir Putin over Russia's continuing attacks on Ukraine.

“There’s chatter of stronger sanctions against Russia: Europe wants to cut the price cap on Russian oil from $60 to $45 per barrel, and a new bipartisan US bill proposes slapping 500 per cent tariffs on goods from countries buying Russian oil. That would hit China and India, which together buy around 70 per cent of Russian supply,” said Ipek Ozkadeskaya, senior analyst at Swissquote Bank.

“Depending on how these EM [emerging market] giants react, demand for US and Brent crude could spike, pushing WTI and Brent prices higher.”

Brent recorded a small weekly gain amid indicators of tightness in the physical market and as demand usually peaks in the summer in the Northern Hemisphere.

“Market players were digesting reports of strong demand amid the Northern Hemisphere summer travel season and tight balances in the physical market, at least in the short term, the latest US weekly stocks and demand data, and developments on the US tariffs war front,” according to a report by Vanda Insights.

Looking ahead to next week, oil prices could continue to see some volatility, Joseph Dahrieh, managing principal at Tickmill, said.

“New sanctions on Russia could affect the oil supply and could support the market to a certain extent. If Opec+ confirms a pause in output increases after September, prices could see more upward potential. However, the August supply hike combined with ongoing worries about global trade will probably keep downward pressure on prices,” he said.

Oil markets grapple with uncertainty about tariffs and the Israel-Iran ceasefire

02:21

Oil demand outlook

Opec on Thursday raised its forecast for world oil and energy demand for the medium and long term but cut oil demand projections for the next four years on China's slowdown.

Global oil demand is projected to expand by nearly 19 per cent to reach 123 million barrels per day by 2050, Opec said in its latest World Oil Outlook 2050 report.

In the medium term, oil demand is projected to increase by 9 per cent to 113.3 million bpd by 2030, from 103.7 million bpd in 2024.

Overall energy demand in the long term is expected to increase by 23 per cent to reach 378 million barrels of oil equivalent per day by 2050, the oil production group said.

However, it reduced its oil demand forecast for next four years over concerns of Chinese demand.