Oil Poised for Third Weekly Decline as Trade Worries Offset Iran Sanctions

Brent crude edged towards $75 a barrel, but remained down nearly 3% for the week, while West Texas Intermediate hovered around $71. President Trump's tariffs on Chinese imports, countered by retaliatory measures from the world's largest oil consumer, have raised concerns about suppressed demand and a potential glut later this year, amplified by Trump's commitment to boost US oil production.

The Biden administration has also imposed new sanctions on Iran, but has not implemented the pledged "maximum pressure" campaign. RBC Capital Markets analysts noted that China remains a significant importer of Iranian oil, raising questions about the impact of tariffs on the country's imports and the potential duration and enforcement of the sanctions.

Crude has experienced volatility this week, surging on Monday due to impending sanctions on Canada and Mexico, before sliding as the measures were delayed. Concerns over demand growth amid the trade conflict with China led to further declines, with private oil refiners in Asia cutting operating rates to pandemic lows.

Physical markets show signs of easing, with European crude prices falling to multi-month lows due to refinery maintenance. The Brent backwardation spread has narrowed, suggesting a less bullish market outlook.

Technical indicators hint at a potential oversold condition, with the nine-day relative strength index nearing the 30 level.