Brent Prices on The Edge: OPEC+ Floods The Market

Blue River

Technical Analysis

Summary:

Brent quotes may regain ground and test the resistance level around the 70.70 USD mark.

Brent forecast: key trading points

OPEC+ continues to ramp up production
Brent crude prices are undergoing a correction
Brent forecast for 22 July 2025: 70.70

Fundamental analysis

The fundamental analysis of Brent for today, 22 July 2025, takes into account that after hitting new July highs, Brent formed a corrective wave and made another attempt to regain ground, but unsuccessfully. Currently, prices are in a new correction phase, trading near 69.90 USD.

The key factors influencing oil prices include:

Rising tensions between the US and the EU, including threats of 30-100% tariffs. New US tariffs targeting countries like Brazil, the Philippines, Iraq, South Korea, and Japan increase global economic uncertainty and may weaken fuel demand
OPEC+ is actively ramping up oil output. Saudi Arabia has been exporting record volumes in recent months. The de-escalation of the Iran-Israel conflict has eased fears over supply disruptions
A weakening US dollar is partially supporting oil prices, but Brent’s upward momentum remains constrained by weak global demand
The EU has approved its 18th sanctions package, including the potential for a lower oil price cap, but this is having only a moderate effect on supply

Brent technical analysis

On the H4 chart, Brent prices tested the lower Bollinger Band and formed a Hammer reversal pattern. Having partially fulfilled the signal, quotes are now undergoing a correction.

The Brent price forecast for 22 July 2025 suggests a growth target at 70.70 USD. A breakout above the resistance level would open the door to a stronger upward wave.

However, an alternative scenario remains possible where Brent quotes may extend their correction to 66.30 USD before initiating a new bullish wave.

Summary

Brent prices are testing the lower boundary of the ascending channel and may be gearing up for another bullish wave amid geopolitical tensions.

Source: RoboForex

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Economic

Permanent Tax Cuts, Temporary Reliefs, and Costly Outcomes

The “One Big Beautiful Bill,” signed into law on July 4, 2025, encapsulates Donald Trump’s renewed economic agenda. The legislation permanently extends the 2017 income-tax cuts, expands business tax breaks, lifts the cap on federal deductions for state and local taxes (SALT), and temporarily eliminates taxes on tips and overtime. While the Trump administration framed the package as pro-growth and middle-class friendly, the Congressional Budget Office (CBO) has issued a sobering warning about its long-term fiscal cost.

The CBO projects a $4.5 trillion decline in federal revenues paired with only $1.1 trillion in reduced spending over the 2024–2034 period. This leads to a net addition of $3.4 trillion to the deficit. These projections are made using a “current-law baseline,” which assumes no further changes in future legislation, and notably exclude dynamic macroeconomic effects, such as any growth-induced revenue feedback.

Health Coverage and Medicaid Restructuring

Beyond the fiscal toll, the law will have a deep human impact. New Medicaid work requirements for recipients under age 65 and restrictions on state-level provider taxes are projected to strip 10 million Americans of health insurance coverage by 2034. These measures represent a shift toward conditional welfare and reduced federal support, under the logic of personal responsibility and cost containment.

Critics argue that the Medicaid cuts will disproportionately harm low-income households, especially as inflation driven in part by Trump’s expansive tariff policy continues to erode purchasing power. June inflation data already show the early signs of upward price pressures, particularly on basic goods. As necessities make up a larger share of expenditures for low-income Americans, the combined effect of higher costs and reduced safety nets could lead to heightened economic vulnerability.

Alternative Deficit Scoring and Political Optics

Republican lawmakers requested an alternative CBO scoring using a “current policy baseline,” which assumes extensions of expiring tax cuts as a given. Under this framework, the law appears to reduce the deficit by $366 billion over ten years. This discrepancy arises because the scoring method assumes that tax cuts were already permanent and thus registers their extension as cost-neutral. However, this version of the analysis is considered less conservative and more politically motivated, as it downplays the revenue impact.

Economists and bond investors have flagged concerns that the large revenue drop may widen the budget deficit to levels that strain Treasury issuance, push up interest rates, and stoke inflation. Trump officials have responded by pointing to surging tariff collections as a new revenue stream, though critics counter that these levies are effectively a hidden tax on consumers and U.S. businesses.

In sum, while Trump’s tax law might appeal politically by delivering tax relief and regulatory rollback, the CBO’s conventional analysis paints a more complex picture one in which fiscal responsibility, public health coverage, and inflation management are being sacrificed for immediate political gain and populist appeal. The coming years may reveal whether the promised growth materializes or whether the U.S. economy buckles under the weight of mounting deficits and reduced public investment.

Reuters: Bloomberg

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Economic

Stalemate Over Agriculture and Industrial Tariffs

Hopes for a quick trade resolution between India and the United States are fading as the August 1 deadline linked to potential 26% U.S. tariffs on Indian imports looms large. According to senior Indian government officials, the fifth round of negotiations, recently concluded in Washington, failed to yield a breakthrough. The central sticking points include U.S. demands for broader access to India’s protected agricultural and dairy markets, which remain politically untouchable in New Delhi.

Conversely, India has pushed for the removal of steep tariffs the U.S. currently imposes on its exports of steel, aluminium, and automobiles. Washington has been reluctant to make concessions without reciprocal access to India's farm sectors. As a result, negotiations are now centered on the possibility of deferring the most contentious issues to a second phase, post an interim agreement.

Domestic Politics and Sensitive Sectors

India’s hesitation to open up its agriculture and dairy sectors is rooted in political and socioeconomic concerns. Both industries involve smallholder livelihoods and local cooperatives with considerable political influence. Any perception of external intrusion especially from large-scale American agribusiness could create domestic unrest and electoral backlash.

Meanwhile, Indian exporters in sectors like gems and jewellery are bracing for potential disruption. A 26% tariff, if imposed, could sharply erode their price competitiveness in the U.S. market. Ajay Sahai of the Federation of Indian Export Organisations noted that the impact may be temporary, given the broader intent on both sides to eventually secure a deal.

Deadlines, Delegations, and Diplomacy

Despite stalled progress, Indian officials remain hopeful. Another U.S. delegation is expected in New Delhi shortly for continued discussions. However, without formal notice from the U.S. on the imposition of tariffs unlike the 20+ other countries that have received such letters New Delhi is in a strategic holding pattern. This ambiguity, though tense, also leaves a window open for last-minute diplomatic maneuvering.

U.S. Treasury Secretary Scott Bessent’s recent remarks further cloud the picture. While he emphasized that deal quality matters more than deadlines, he clarified that any extensions to the August 1 cutoff would depend on President Trump’s decision.

Looking Ahead: Possibility of a Broader Deal

Although the interim pact now seems unlikely before August 1, officials on both sides are cautiously optimistic about striking a broader, more comprehensive agreement by September or October. This timeline aligns with the framework discussed during Prime Minister Modi’s February summit with President Trump.

Should both nations succeed in tabling the most divisive issues and building consensus around less sensitive sectors such as digital trade, investment facilitation, or services the broader pact may still materialize. Until then, the risk of new tariffs hangs over Indian exports, a potent reminder of how sensitive domestic policies and external trade priorities can clash in geopolitically complex negotiations.

Source: Reuters

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Stocks

Market Resilience Amid Political Uncertainty

The Trump administration’s escalating critique of the U.S. Federal Reserve took center stage this week, with Treasury Secretary Scott Bessent urging a comprehensive review of the institution. In a CNBC interview, Bessent questioned the Fed’s inaction on interest rate cuts despite what he described as "very little, if any, inflation." He criticized Fed officials, many of whom hold PhDs, for being entrenched in outdated thinking.

However, investors appear largely unfazed. U.S. equity markets continue to rally, with the S&P 500 breaching the 6,300 mark for the first time and the Nasdaq Composite closing at a record high. The market's upward momentum, powered by gains in tech giants like Meta and Amazon, reflects confidence in corporate performance despite the political noise.

Fed’s Independence Under Political Pressure

The critique of the Fed comes amid broader tension between the Trump administration and central banking norms. Bessent’s remarks, combined with speculation around President Trump’s potential replacement of Fed Chair Jerome Powell, have revived concerns about the erosion of the central bank’s independence. Historically, markets have been sensitive to such threats, but the current bullish sentiment suggests that traders remain focused on earnings strength and macroeconomic data for now.

The IPO pipeline is heating up again, with Figma aiming for a valuation of up to $16.4 billion. The design software company’s new filing shows plans to price shares between $25 and $28, reflecting strong investor demand in the tech space.

In parallel, a more unorthodox financial maneuver has emerged: Trump Media has reportedly accumulated a $2 billion bitcoin reserve, now representing roughly two-thirds of its liquid assets. This massive crypto hoard underscores the administration's pivot toward alternative assets amid growing skepticism toward conventional monetary policy.

European Defense Sector Overheated

Across the Atlantic, some analysts warn that Europe’s defense sector previously bolstered by war-driven procurement and NATO commitments may be nearing a valuation peak. A fund manager overseeing nearly $2 billion in assets told CNBC that recent valuations are becoming “extreme,” hinting at potential corrections in the near term.

Finally, beyond financial headlines, the auto industry is seeing a resurgence in hope for solid-state batteries. Once considered a long-shot innovation, recent announcements from major automakers suggest commercial viability may be approaching sooner than expected. These advanced batteries promise greater energy density and safety, which could reshape electric vehicle economics in the coming decade.

While political rhetoric from the Trump administration introduces risk, markets remain steady buoyed by corporate earnings, IPO enthusiasm, and a hunger for alternative investments. However, investors would do well to remain cautious. The mix of policy uncertainty, trade tensions, and macroeconomic shifts could swiftly reintroduce volatility, even amid record-breaking highs.

Source: CNBC

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Economic

Industrial Overcapacity and Deflation: A Tougher Round Ahead

China’s leadership is ramping up rhetoric against destructive price wars among manufacturers, suggesting an imminent revival of supply-side reforms aimed at trimming excess industrial capacity. This strategy helped end a prolonged period of deflation a decade ago. But this time, it faces far greater challenges.

The manufacturing ecosystem has evolved. Many industries at the center of today’s overcapacity issues electric vehicles, solar panels, and batteries are driven by private firms rather than state-owned giants. Unlike previous reforms, which used blunt administrative tools to shutter state-owned coal and steel plants, the current environment requires nuanced economic levers like subsidy rollbacks, tighter credit, and land-use restrictions, which are harder to implement consistently across regions.

Local Governments: A Barrier to Reform

One of the most significant obstacles is the misalignment of incentives between Beijing and local governments. While the central government is eager to curb overproduction to stabilize prices, local authorities remain focused on fostering regional growth through industrial expansion. Their reluctance to scale back support for local champions is undermining national reform goals.

An anonymous policy adviser noted that every province now targets the same few "new economy" sectors, leading to intense intra-national competition. This has not only flooded markets with cheap goods but also raised tensions with major trading partners like the U.S. and EU, who allege that Chinese overproduction distorts global trade.

High Stakes and Limited Options

The stakes are high. China’s producer prices have fallen for 33 consecutive months, with industrial margins eroding and unemployment especially among youth remaining elevated at 14.5%. Despite headline GDP growth targets of around 5%, the underlying economy shows signs of stress: factory layoffs, wage cuts, and weakening domestic demand.

Macquarie estimates that last decade’s capacity cuts cost tens of millions of jobs. Back then, the economic shock was offset by a massive $1.4 trillion urban redevelopment scheme. Today, there is no comparable buffer. The real estate sector, once China’s go-to engine for job creation and stimulus, is now overbuilt and unlikely to absorb industrial dislocation again.

Deflation Dilemma: Short-Term Pain or Long-Term Stagnation

Economists are clear: slashing capacity could cause a short, sharp economic shock, while allowing overcapacity to linger risks long-term deflation. Neither path is easy, but the current strategy seems to lean toward gradual pruning to avoid destabilizing employment.

Professor He-Ling Shi of Monash University warns the likelihood of failure is high. Without a robust alternative to absorb job losses, China may be forced to accept slower, prolonged growth. Meanwhile, analysts from Peking University and UBS highlight that while industrial reform is necessary, it must be paired with stronger demand-side stimulus to succeed.

Unlike 2015, today’s economic environment offers fewer safety nets and more structural constraints. The new supply-side reform wave may help ease deflationary pressures over time, but without bold demand-side measures or political alignment across central and local governments, it’s unlikely to offer a rapid recovery. As global scrutiny intensifies and domestic confidence wavers, China faces a delicate balancing act between reform, growth, and stability.

Source: Reuters

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Economic

Strategic Infrastructure Pact Anchors Trade Concessions

Indonesia is accelerating its energy infrastructure ambitions through a high-stakes agreement with KBR Inc., formerly Kellogg Brown & Root. According to sources close to the negotiations and a confidential presentation reviewed by Reuters, the $8 billion engineering, procurement, and construction (EPC) deal covers 17 modular oil refineries across the archipelago.

This initiative aligns with Indonesia’s broader push to reduce reliance on fuel imports, diversify refining capacity, and distribute energy production more evenly across the country. Modular refineries, with their flexibility and lower upfront costs compared to conventional plants, serve as a key instrument in achieving this goal.

The deal was disclosed by Economic Minister Airlangga Hartarto during a closed-door business briefing in Jakarta. It forms a significant component of the recent U.S.-Indonesia trade negotiations that resulted in a favorable reduction of proposed U.S. tariffs on Indonesian goods from a punitive 32% to a more manageable 19%.

Trade Diplomacy Yields Investment and Energy Gains

The refinery contract illustrates how strategic trade diplomacy can yield tangible investment flows. While the broader trade deal included public announcements on enhanced energy cooperation, the KBR-Danantara contract had remained undisclosed until now.

The agreement bolsters bilateral relations and highlights the effectiveness of using large-scale infrastructure projects as leverage in trade talks. It also positions the U.S. as a partner in Indonesia’s industrial development at a time when competition for infrastructure influence in Southeast Asia remains high, particularly from China.

Implications for U.S. and Indonesian Interests

For KBR Inc., the deal marks a significant win in overseas EPC services, reinforcing its global footprint and opening doors in a country prioritizing energy modernization. For Indonesia, the partnership strengthens domestic refining capabilities and partially shields its economy from global fuel price shocks and logistic disruptions.

Moreover, the deal’s timing just ahead of the August 1 tariff deadline facing several Indo-Pacific nations suggests a calculated effort by Indonesia to appease U.S. trade concerns while extracting long-term development commitments in return.

The $8 billion refinery pact signals a new chapter in Indonesia-U.S. trade relations, where diplomacy extends beyond tariff lines to infrastructure collaboration. As Indonesia pursues self-sufficiency in energy and the U.S. seeks reliable Indo-Pacific allies, this contract may set a precedent for how emerging economies negotiate on equal footing by coupling economic openness with strategic industrial projects.

Source: Reuters

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Euro’s Ascent Becomes a Drag on Export-Heavy Corporates

The euro’s sharp 9% rise in Q2 and 13% year-to-date appreciation has begun to bite into the earnings potential of Europe’s major exporters. As the earnings season accelerates, companies like SAP, UniCredit, and Julius Baer are under investor scrutiny, with the primary focus being how foreign exchange pressures and global trade tensions have affected margins and revenue forecasts.

SAP, Europe’s largest software firm, previously flagged that each cent gain in the euro could reduce annual revenue by approximately €30 million. With the euro climbing from $1.1329 at the end of April to $1.1688 this week, the currency headwind is no longer theoretical it is quantifiable and material. While SAP continues to benefit from strong demand for AI-driven cloud services, the euro's rise could blunt the translation of overseas revenue into euros, particularly in North America and emerging markets.

Investor Confidence Hangs on Earnings Resilience

So far, earnings in Europe have been described by RBC Capital Markets as “fine but not fabulous,” leaving markets reliant on a handful of corporate leaders to deliver above-expectation results. Beyond SAP, investors are closely watching upcoming reports from LVMH and Roche to assess the impact of currency moves and tariff exposure across different sectors from luxury goods to pharmaceuticals.

The stronger euro not only compresses reported earnings for firms operating globally, but also undercuts pricing competitiveness abroad, particularly in sectors like industrial manufacturing and autos. For companies with significant U.S. exposure, the shift in currency dynamics may lead to disappointing forward guidance even if current-quarter results hold steady.

Trade Tensions and Policy Noise Weigh on Forecast Visibility

The euro’s surge has been partially driven by investors diversifying away from the U.S. dollar amid rising political and institutional uncertainty in the United States. President Donald Trump’s erratic trade strategy and threats of a 30% tariff on EU imports if no agreement is reached by August 1 continue to cloud the external environment for European firms.

This is compounded by mounting concerns over the independence of the Federal Reserve, with U.S. Treasury Secretary Scott Bessent recently calling for a broader institutional review of the Fed’s performance. Speculation that Trump may fire Fed Chair Jerome Powell has further destabilized U.S. policy expectations and contributed to dollar outflows.

European markets are also contending with their own strategic recalibrations. EU diplomats are reportedly advancing “anti-coercion” mechanisms that could allow Brussels to retaliate by targeting U.S. services and limiting access to public tenders. While such tools are not yet active, their inclusion in trade policy debates heightens investor caution.

Despite record highs in U.S. equities and a solid start to global earnings, the strength of the euro poses a serious test for Europe Inc. Currency headwinds, in tandem with unresolved trade tensions and political instability across both sides of the Atlantic, mean this earnings cycle will be watched less for bottom-line results and more for guidance and outlook clarity. With high expectations already priced in, disappointing forward commentary particularly from firms sensitive to FX and tariffs could trigger broader revaluation across European equities.