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Oil markets opened Tuesday on a cautious note, with prices stabilising after a rally in the previous session. Around noon, Brent crude futures edged up by just 1 cent to $70.05 per barrel, while US West Texas Intermediate (WTI) slipped by 2 cents to $66.69.

This pause comes after both benchmarks gained more than 2 per cent on Monday, with Brent briefly touching its highest level since 18 July, reported Reuters.

Trade Deal Brings Relief but Questions Remain

Investor sentiment was buoyed earlier this week by the announcement of a trade agreement between the United States and the European Union. The deal, which imposes a 15 per cent import tariff on most EU goods, successfully averted a full-blown trade war between the two allies – a scenario that would have rattled nearly a third of global trade and weighed heavily on fuel demand.

While the agreement calls for $750 billion worth of EU purchases of US energy in the coming years and $600 billion in European investments into America during President Donald Trump’s second term, analysts are sceptical about whether these ambitious targets can be met.

“We think the 15 per cent rate will pose headwinds to the Euro area’s growth outlook but is unlikely to push the economy into recession,” ANZ analysts noted in a briefing, pointing out that timelines for the commitments remain vague.

Market Eyes Fed Rate Decision and China Talks

Attention in oil markets is now shifting towards the US Federal Open Market Committee (FOMC) meeting scheduled for July 29–30. While the Fed is widely expected to keep rates unchanged, traders are watching for any dovish signals that could influence demand projections.

“Momentum favours the upside in the near term, but the market is vulnerable to volatility triggered by central bank surprises or a breakdown in trade negotiations,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Meanwhile, top economic officials from the US and China met in Stockholm for over five hours on Monday, with further talks planned. Their discussions aim to resolve long-running disputes at the centre of the trade war between the world’s two largest economies.

Adding to the uncertainty, President Trump has given Russia “10 or 12 days” to make progress on ending the war in Ukraine, warning that sanctions will follow otherwise. The combination of diplomatic tensions, trade negotiations, and monetary policy signals leaves oil prices balanced between potential gains and renewed volatility in the days ahead.