Oil prices inch higher after US-Japan trade deal, but EU-China concerns limit gains 

SINGAPORE: Oil prices edged slightly higher in Asian trading on Wednesday, snapping a three-day losing streak, after a trade agreement between the US and Japan raised hopes of easing tariff tensions. However, gains remained limited as doubts persisted over progress in upcoming talks between the European Union and China. 

By 0351 GMT, Brent crude futures had risen by 21 cents, or 0.31 per cent, to $68.80 a barrel, while US West Texas Intermediate (WTI) crude was up 17 cents, or 0.26 per cent, at $65.48. 

The modest recovery came after both benchmarks dropped around 1 per cent in the previous session, following EU warnings of potential countermeasures against US tariffs. Hopes for a breakthrough ahead of the August 1 deadline have faded. 

On Tuesday, President Donald Trump announced that the US had reached a trade agreement with Japan, which includes a 15 per cent tariff on Japanese imports to the US. He also claimed that Japan had committed to investing $550 billion in the US. 

Despite the positive tone of that announcement, analysts remain cautious. Vandana Hari, founder of oil market consultancy Vanda Insights, said the earlier slide in oil prices appears to have paused, but concerns over trade disputes with the EU and China continue to weigh on investor sentiment. 

Expectations are also low for Thursday’s EU-China summit, which is seen as a test of the EU’s unity as it faces growing tensions with both Washington and Beijing. According to China’s commerce ministry, officials from both sides held “candid and in-depth” talks ahead of the meeting, discussing trade cooperation and other challenges. 

On the supply side, oil prices found some support from a decline in US crude and gasoline inventories last week, according to American Petroleum Institute (API) data cited by market sources. However, distillate inventories, including diesel, rose by 3.48 million barrels. 

“This will bring some relief to the middle distillate market, which has been tightening,” ING analysts said in a note. They added that although crude stocks remain low, an expected surplus later this year may limit further price gains. 

Adding to the bullish signals, US Energy Secretary Jennifer Granholm said Washington was considering fresh sanctions on Russian oil to help pressure Moscow over the Ukraine war. 

Meanwhile, the EU has agreed to its 18th sanctions package against Russia, including a lower price cap on Russian crude exports. But analysts warned that without US backing, the impact of these measures may be limited.