Oil prices fell on Thursday as investors weighed the extension of an existing trade deal between the U.S. and Mexico, while a surprise build in U.S. crude stocks on Wednesday also dragged on prices.
Brent crude futures for September, set to expire on Thursday, declined by 83 cents, or 1.13%, to $72.41 a barrel by 11:41 a.m. EDT (1541 GMT). U.S. West Texas Intermediate crude for September fell $1.33, or 1.9%, to $68.67.
Both benchmarks had recorded 1% gains on Wednesday.
U.S. President Donald Trump said on Thursday he and Mexican President Claudia Sheinbaum had agreed to extend an existing trade deal between their two countries for 90 days and to continue talks over that period with the goal of signing a new deal.
“Mexico will continue to pay a 25% Fentanyl Tariff, 25% Tariff on Cars, and 50% Tariff on Steel, Aluminum, and Copper. Additionally, Mexico has agreed to immediately terminate its Non-Tariff Trade Barriers, of which there were many,” Trump said in a Truth Social post.
News of the extension weighed on crude futures, said John Kilduff, partner at Again Capital in New York.
“Overall, the tariffs are negative for oil demand going forward, and this situation with Mexico kicks the can down the road,” Kilduff said.
U.S. crude oil inventories rose by 7.7 million barrels to 426.7 million barrels in the week ending July 25, driven by lower exports, the Energy Information Administration said on Wednesday. Analysts had expected a draw of 1.3 million barrels.
Gasoline stocks fell by 2.7 million barrels to 228.4 million barrels, far exceeding forecasts for a draw of 600,000 barrels.
“U.S. inventory data showed a surprise build in crude stocks, but a bigger-than-expected gasoline draw supported the view of strong driving season demand, resulting in neutral impact on the oil market,” said Fujitomi Securities analyst Toshitaka Tazawa.
The threat of U.S. sanctions on Russia has helped support oil prices this week.
On Monday, Trump said he would start imposing measures on Russia, including 100% secondary tariffs on its trading partners, if it did not make progress on ending the war in Ukraine within 10-12 days, moving up an earlier 50-day deadline.
The U.S. has also warned China, the largest buyer of Russian oil, that it could face huge tariffs if it continued its purchases.
India’s state refiners have not sought Russian crude in the past week or so, four sources familiar with the refiners’ purchase plans told Reuters, as Trump has warned countries not to purchase oil from Moscow.
On Wednesday, the U.S. Treasury Department announced fresh sanctions on more than 115 Iran-linked individuals, entities and vessels, stepping up the Trump administration’s maximum pressure campaign after bombing Iranian nuclear sites in June. (Reuters)
