Oil Prices Steady as Traders Weigh Ukraine Outlook Ahead of Tariffs
Oil prices were steady early in the week as traders weighed the prospect of Russia’s war in Ukraine ahead of President Donald Trump’s tariffs on U.S. trading partners, which could lead to retaliatory action.
Brent traded near $73 a barrel after posting its biggest monthly loss since September, while West Texas Intermediate was below $70. European leaders are trying to put together what Britain calls a “coalition of the willing” to secure Ukraine after a U.S.-brokered cease-fire and a potential withdrawal of American troops.
Europe and the U.S. have sought to punish Russia for the invasion by imposing sanctions on its oil industry, but Trump’s direct and rapid diplomacy with President Vladimir Putin to end the war has damaged historic ties.
“That probably makes it much more difficult to get a mutually agreeable cease-fire, and so it could be argued that it takes more time for any steps to ease sanctions on Russia to start to develop,” said Robert Rennie, head of commodity and carbon research for Westpac Banking Corp.
Markets will have little time to digest the Ukraine fallout before the next round of uncertainty unleashed by Trump, with levies on China, Mexico and Canada scheduled to begin Tuesday. They may be delayed, but any retaliation is likely to be temporary.
Trump’s threats to impose broad tariffs on a range of countries have weighed on sentiment across global markets, with benchmark oil futures trending lower since mid-January. Hedge funds cut their net-long positions in WTI to the lowest since 2010 through Feb. 25.
The tariffs on Canadian and Mexican oil, as well as the threat to revoke Chevron Corp.’s license to produce and export Venezuelan crude, jeopardize about 80% of U.S. crude imports. That could raise costs for refiners at a time when they have ramped up processing to historic highs.
Markets will also be watching for signs of planned spending by China as it heads into its biggest political gathering of the year. Thousands of delegates including ministerial chiefs are set to gather in Beijing on Wednesday.
Source: Bloomberg
