Brent falls on tariff worry and rising supply

Brent crude oil futures fell to around $69.20 per barrel on Tuesday, retreating from a two-week high as a combination of rising US tariffs and expanding supply weighed on market sentiment. Investors are increasingly concerned about the demand outlook, with new trade barriers threatening to slow global economic growth and, consequently, oil consumption.

On Monday, President Donald Trump began issuing the first in a series of letters threatening higher tariff rates on key trading partners, including a 25% levy on imports from major allies such as Japan and South Korea, set to take effect from August 1. These measures have raised worries about the potential for a broader slowdown in trade and industrial activity, which could dampen oil demand in the coming months.

Compounding bearish pressure, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed on Saturday to increase output by 548,000 barrels per day (bpd) in August. This marks the fourth consecutive monthly production hike and exceeds market expectations.

The additional supply will restore nearly 80% of the voluntary cuts—amounting to 2.2 million bpd—previously made by eight OPEC members. Analysts suggest that the sustained increase in production may exacerbate fears of an oversupplied market later this year, especially if demand growth slows amid rising geopolitical and economic uncertainties.

Despite these headwinds, Brent’s overall losses were limited by renewed geopolitical tensions in a strategically critical region. Yemen’s Houthi rebels launched a second attack within days on commercial vessels transiting the Red Sea, heightening fears of potential disruptions to one of the world’s most vital shipping corridors.

The risk of interference with oil tankers and cargo ships navigating this chokepoint adds a layer of geopolitical risk premium to prices, offering some support against broader bearish factors.

Looking ahead, market watchers will closely monitor how these competing forces—trade policies, OPEC+ production decisions, and regional security threats—play out over the coming weeks. Any escalation in geopolitical risks or unexpected shifts in supply and demand dynamics could quickly influence price direction. Additionally, upcoming economic data, particularly from major consumers like China and the US, will be key indicators of demand resilience amid ongoing trade tensions.