Oil prices pull back amid geopolitical uncertainty and OPEC+ anticipation

Oil prices retreated on Thursday, giving up the strong gains recorded during the previous session, as markets reassessed geopolitical developments and awaited the outcome of the upcoming OPEC+ production decision. The move reflects a complex mix of sentiment-driven reactions, soft demand signals, and lingering macroeconomic uncertainties.

Price action

Brent crude futures for September delivery fell by $0.60 (0.8%) to trade near $68.40 per barrel, while WTI crude for August dropped $0.65 (0.9%) to $66.80 per barrel. This follows a strong rally on Wednesday, where both benchmarks gained over 3% amid a wave of geopolitical risk repricing.

Despite yesterday’s jump, both Brent and WTI remain under pressure after suffering their worst weekly performance since March 2023—shedding around 13% in value last week alone.

Key drivers behind the volatility

1. Iran nuclear tensions reignite risk premiums:
   Markets were shaken after Iran announced a suspension of cooperation with the IAEA and passed legislation restricting future nuclear inspections. While no immediate disruption to oil supplies has been reported, the geopolitical premium returned—albeit more as a sentiment factor than a fundamental shift.
2. Bearish US inventory and demand data:
   U.S. EIA data revealed a surprise build of 3.8 million barrels in crude inventories last week, against expectations for a drawdown. Meanwhile, gasoline demand slipped to 8.6 million barrels per day, casting doubt on consumption strength during the peak summer driving season.
3. Trump’s trade deal with Vietnam adds short-term optimism:
   The announcement of a trade agreement between the U.S. and Vietnam, including a 20% tariff on Vietnamese exports, boosted risk appetite on Wednesday. However, the oil market's reaction appears to have been more emotional than structural.
4. OPEC+ expected to hold steady:
   Reports suggest OPEC+ may stick to its current path of increasing output by 411,000 barrels per day next month. While this aligns with recent decisions, any change in tone or forward guidance could surprise markets that have largely priced in a status quo outcome.
5. US jobs report could tilt the demand outlook
   Traders now await the U.S. nonfarm payrolls (NFP) report due later today. A weak reading could bolster expectations for interest rate cuts from the Federal Reserve, potentially supporting economic activity—and by extension, oil demand. Notably, the latest ADP private employment report showed a surprise decline in June—the first in over two years.

Strategic takeaway

Oil markets remain caught between demand-side concerns and geopolitical risk premiums. With sentiment sensitive to both macro data and policy shifts, today’s U.S. jobs report could play a pivotal role in shaping short-term price direction. Traders should brace for volatility, especially as monetary expectations shift and OPEC+ prepares its next move.