Oil Prices Set for Weekly Drop as Trump Tariffs Outweigh Iran Sanctions
Oil prices are headed for a third weekly decline on concerns that President Donald Trump’s tariffs on China will hurt demand more than the new U.S. administration’s first round of sanctions on Iran.
Brent crude futures rose near $75 a barrel but are still down nearly 3% this week, while West Texas Intermediate neared $71. Trump has imposed levies on all imports from China, with the world’s largest oil importer retaliating with its own more restrained measures, which are due to take effect on Monday.
The trade war and its potential for escalation have raised concerns that it will crimp crude demand growth and lead to a glut later in the year, exacerbated by Trump’s pledge to increase U.S. oil production. The new administration also announced new sanctions on Iran, though it stopped short of implementing the “maximum pressure” campaign it had promised. “With the bulk of Iran’s remaining oil exports going to China, we will be watching to see whether the country’s imports will be part of the broader U.S.-China tariff dialogue,” RBC Capital Markets LLC analysts including Helima Croft said in a note.
“However, questions remain about the duration of these measures and the potential for stringency in enforcement.” Crude oil has had a tumultuous week, surging on Monday as sanctions were set to take effect on Canada and Mexico, the two largest foreign suppliers of crude to the U.S., before slumping as the measures were delayed for a month. The declines extended to their lowest levels this year as the conflict with China raised concerns about demand growth. Private refiners in the Asian nation have cut operating rates to lows last seen at the start of the pandemic.
There are also signs of easing in the physical market. Crude prices in Europe have fallen to multi-month lows on refinery maintenance, while short-term Brent spreads have narrowed to 44 cents a barrel in a bullish backwardation, compared with about $1 in a backwardation late last month. Meanwhile, some technical indicators suggest this week’s decline may have been too deep, with the nine-day relative strength index nearing 30, indicating oil is oversold. Brent for April delivery rose 0.5% to $74.67 a barrel at 2:23 p.m. in Singapore. WTI for March delivery rose 0.4% to $70.91 a barrel.
Source: Bloomberg
