Oil Prices Resume Rise Supported by US-Japanese Agreement and Expectations of Inventory Decline

Oil prices resumed their upward trend during trading on Wednesday, July 23, after three consecutive sessions of decline, supported by the announcement of a new trade agreement between the United States and Japan, along with expectations of a decrease in US crude inventories, indicating an improvement in global demand.

Brent crude futures rose by 0.36% to reach $68.84 per barrel, while West Texas Intermediate crude futures rose by 0.35% to $65.55 per barrel.

This increase followed the announcement by US President Donald Trump of his country reaching a trade agreement with Japan, including imposing a 15% tariff on US imports from Japan, in addition to Tokyo's approval to inject $550 billion worth of investments into the US economy.

Prices had faced downward pressure in the previous session due to concerns about escalating trade tensions between the United States and the European Union, after the latter announced considering retaliatory measures against US tariffs, affecting prospects of reaching an agreement before the deadline set for August 1.

On the other hand, a Reuters survey showed a decline in US inventories of crude oil, gasoline, and distillate products last week, indicating a recovery in demand. Analysts expected a decrease of about 1.6 million barrels in US crude inventories during the week ending on July 18, a figure later confirmed by unofficial data from the American Petroleum Institute.

In a related context, the US Energy Secretary announced that Washington is considering imposing sanctions on Russian oil exports as part of its efforts to end the war in Ukraine. This comes days after the European Union approved a new package of sanctions against Moscow, including lowering the ceiling on Russian oil prices, despite warnings from analysts that "lack of coordination with the United States may reduce the effectiveness of these measures".