Oil prices dip as EU-U.S. trade war jitters grow

Investing.com--Oil prices fell Tuesday, weighed by the prospect of a U.S.-EU trade conflict, which could impact economic growth in these two major energy consuming blocs 

At 08:15 ET (12:15 GMT), Brent oil futures for September fell 0.8% to $68.64 a barrel and West Texas Intermediate crude futures fell 0.9% to $65.38 a barrel.

US-EU trade war jitters grow 

Oil markets were on edge over a brewing trade war between the U.S. and European Union, as recent reports pointed to continued disagreements over tariff levels. 

Washington has been reported as demanding at least a 15% tariff on EU goods, catching Brussels off guard and drawing calls for retaliatory tariffs on American goods.

Analysts at ANZ warned that the “trade deal impasse could hurt economic activity and thus crude oil demand,” especially if the U.S. pursues relatively high tariffs against the EU. 

The EU tariffs, along with levies against a host of other major U.S. trading partners, are set to take effect from August 1, which has been described as a “hard deadline” by White House officials. The proposed duties include a 25% levy on Japan, a 35% tariff on Canada, and a 50% duty on Brazil. 

The steep tariff levels have also spurred concerns over their potentially disruptive effects on the global economy, which could in turn hurt oil demand. 

EU-Russia sanctions seen having little impact

The decision by the European Union to impose stricter sanctions against Russia’s oil industry has had little impact on the price of crude so far, and there have been few signs that it prompt a ceasefire in the Russia-Ukraine war.

The conflict has now stretched on for over three years. While it had initially pushed oil prices to near record highs, markets have since greatly priced out any potential supply shocks stemming from the conflict.

"It’s important to point out that while the EU has lowered the price cap, the G-7 cap remains unchanged. The EU would need to get the US on board to lower the cap," said analysts at ING, in a note.

"The issue is that the G-7 price cap has not been effective, given that Russia built up a shadow fleet of oil tankers to get around it. The EU has also sanctioned another 105 vessels, leaving a total of 444 vessels in Russia’s shadow fleet affected. The lack of reaction shows that the market is not convinced by the effectiveness of these sanctions."

Ambar Warrick contributed to this article