Oil Prices Fluctuate as Traders Assess Trump’s Sanctions, Tariffs
Oil prices edged lower in a volatile session as traders grappled with new sanctions on Iran, signs that U.S. tariffs on Canada and Mexico are still in place, and pessimism in the Chinese market.
Brent crude fell to near $74 a barrel, erasing earlier gains. The U.S. imposed more restrictions on brokers, ships and individuals it said were linked to illegal shipments of Iranian crude.
At the same time, levies set to hit two U.S. neighbors were “on time” to go into effect next month, Trump told a news conference. Canada and Mexico are America’s top foreign crude suppliers and major trading partners.
In China, a major oil consumer, stocks fell after Trump’s move to further decouple economic ties between the world’s two largest economies fueled risk-off sentiment that spread to other markets.
Crude had a rocky start to the year, first rising on cold weather and earlier U.S. sanctions, then retracing gains after Trump took office and began a tariff plan that could hurt global growth and demand.
But levies on North American neighbors could also affect supplies. Canada, in particular, ships about 4 million barrels of crude a day to the U.S., and many American refineries are built to handle that heavy crude, rather than the light oil from shale fields.
Meanwhile, the action against OPEC member Iran targets a network linked to the shipment of tens of millions of barrels of crude, with sanctioned entities located in Iran, the United Arab Emirates, Hong Kong, India and China, the U.S. State and Treasury departments said.
“While the market remains well supplied, the renewed focus on Iran sanctions provides some support today,” said Jens Naervig Pedersen, a strategist at Danske Bank. Oil prices have been trading broadly higher on trade concerns and weaker U.S. economic data, he said. The latest sanctions on Iranian oil could prompt carriers to respond by increasing ship-to-ship transfers, or turning off geolocation signals for longer in the fast-adapting illicit trade, market participants said.
In the case of Russian crude, Moscow is increasingly using secret cargo transfers as it grapples with sanctions and tries to keep its oil exports flowing.
Traders are also grappling with a series of other supply issues. While OPEC and its allies are widely expected to delay increasing output once again, Iraq is pushing to restart pipeline flows from Kurdistan, and negotiations to end the war in Ukraine could affect Russian crude shipments.
While talking about reviving its so-called maximum pressure campaign against Iran, the Trump administration has more broadly indicated that it prefers cheaper crude. That includes steps to boost domestic production, as well as asking OPEC+ to cut prices.
So many conflicting signals have kept crude prices in a narrow range this month.
Brent for April delivery was trading 0.7% lower at $74.28 a barrel at 9:14 a.m. in New York. WTI for April delivery was trading at $70.28 a barrel.
Source: Bloomberg
