Oil Markets Slide on Global Economic Concerns
Oil prices fell to their lowest in three weeks on Friday, July 25, as markets reacted to a mix of bearish economic signals from the United States and China, coupled with mounting signs of increased oil supply. The decline reflects growing investor caution amid uncertain global economic conditions and shifting geopolitical dynamics.
Brent crude futures lost 74 cents (1.1%), settling at $68.44 per barrel, while West Texas Intermediate (WTI) dropped 87 cents (1.3%) to close at $65.16. These marked the lowest settlement levels for Brent since July 4 and for WTI since June 30.
On the week, Brent slipped by approximately 1%, while WTI posted a sharper 3% decline, reflecting the deepening investor unease over global demand prospects.
Mixed Economic Signals from US and China
The downward pressure on oil came largely from disappointing economic indicators from the world's two largest economies.
In the United States, new orders for capital goods unexpectedly fell in June, indicating a slowdown in business investment. Although shipments of capital goods rose modestly, analysts interpreted the data as a signal that equipment spending is losing momentum.
Still, some optimism lingered in the background after President Donald Trump’s meeting with Federal Reserve Chair Jerome Powell, where Trump hinted that interest rate cuts may be on the horizon. Lower interest rates can stimulate borrowing and investment, potentially boosting economic activity — and with it, oil demand.
In China, fiscal revenues for the first half of the year dipped by 0.3%, maintaining the pace of decline from earlier months. The weak performance underscores the continued strain on public finances and broader economic activity, despite ongoing efforts by Beijing to stabilize growth.
Trade Hopes Offer Limited Relief
Offsetting some of the bearish sentiment was optimism surrounding U.S.–EU trade negotiations. European Commission President Ursula von der Leyen is set to meet President Trump in Scotland on Sunday, with EU officials expressing hope for a framework trade deal. Such an agreement could improve the global economic outlook and support long-term oil demand.
In Europe, data showed the euro zone economy remains resilient in the face of global trade tensions. Meanwhile, comments from European Central Bank policymakers suggested a more measured approach to monetary policy, with markets adjusting expectations for further rate cuts.
Supply-Side Developments Add to Volatility
On the supply side, several developments suggested a possible uptick in global oil availability:
- The U.S. is expected to ease restrictions on companies like Chevron to resume limited operations in Venezuela, which could boost the country’s exports by over 200,000 barrels per day (bpd).
- Iran, another major OPEC member under sanctions, resumed nuclear talks with European powers, raising the prospect of future increases in sanctioned oil flows should diplomatic progress be made.
- In Russia, crude exports from western ports are expected to dip slightly in August to 1.8 million bpd, compared to 1.9 million bpd in July, according to Reuters estimates.
Meanwhile, the OPEC+ alliance—which includes OPEC members and allies such as Russia—is expected to maintain its current plan to raise output, citing robust summer demand. A meeting of its Joint Ministerial Monitoring Committee (JMMC) is scheduled for Monday, although the committee lacks decision-making power on production levels.
Additionally, U.S. energy firms reduced the number of active oil and gas rigs for the 12th time in 13 weeks, according to data from Baker Hughes, indicating potential moderation in future U.S. output growth.
Outlook: Balancing Risks and Opportunities
Oil markets remain caught in a delicate balance. On one hand, near-term concerns over economic slowdown in key markets and rising supply weigh heavily. On the other, optimism over improving trade ties and possible monetary easing keeps longer-term demand prospects alive.
As traders await further clarity from upcoming OPEC+ meetings, U.S. monetary policy signals, and geopolitical developments, volatility is likely to remain a key feature in the weeks ahead.