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Oil prices took a sharp dip on Thursday, July 3, 2025, after rebounding the previous session. Brent crude fell by 53 cents to $68.58 per barrel, while U.S. West Texas Intermediate dropped 51 cents to $66.94 per barrel. The decline came amid growing concerns over potential reinstatement of U.S. tariffs, which threaten to suppress global fuel demand. Market anxiety was further intensified by indications that OPEC+ members are preparing to increase output by approximately 411,000 barrels per day at their upcoming meeting .
Just a day before, oil prices surged around 3% due to geopolitical tension as Iran suspended cooperation with the United Nations nuclear watchdog and news of a preliminary U.S.–Vietnam trade deal. However, hopes were short-lived when uncertainty re-entered the scene: the 90-day pause on U.S. tariff hikes is set to end on July 9 without new agreements with major partners like the EU and Japan. This looming uncertainty likely contributed to the drop in prices .
The anticipated OPEC+ increase in production further weighed on sentiment. After coordinated cuts supported prices earlier this year, General-month plans to boost supply could overwhelm the market just as demand shows signs of stalling . Where OPEC+ has earlier withheld supply to prop up prices, the upcoming expansion in production signals a shift in strategy that is sending ripples across futures markets.
Another contributing factor was a surprise build in U.S. crude inventories. Data from the Energy Information Administration showed a 3.8 million-barrel increase last week, in contrast to expectations of a 1.8 million-barrel draw. This unexpected rise signals weakening fuel demand in what should be peak summer driving season . Adding to the gloomy outlook is a private survey suggesting China’s service sector grew at its slowest pace in nine months during June, reflecting weakening demand in the world’s largest energy importer .
Looking ahead, many investors expect near-term hesitancy in oil exposure, especially through the U.S. Independence Day weekend. Analysts at ING noted that market participants were likely to reduce risk before the holiday, which typically reduces trading volumes and amplifies volatility .
Another critical factor at play is the impending U.S. jobs report, due Thursday morning. As policymakers weigh inflationary pressures from possible tariff policies and production dynamics, labor market data will likely influence future Fed decisions and market tone. With less clarity on interest rate paths, traders are adjusting risk accordingly .
Taken together, the immediate decline in crude prices reflects a confluence of geopolitical, economic, and policy uncertainties: the thaw in Middle Eastern tensions that briefly buoyed prices; looming U.S. tariffs that threaten demand; OPEC+’s production strategy shift; and faltering demand signals from major importers. For consumers, softer oil prices may translate into modest relief at the pump. Yet refiners and producers may lean forward with caution, bracing for volatile swings in the coming weeks.
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