The market is awaiting confirmation on details about US trade duties. Oil prices were flat in Wednesday’s trading session, after a slight decline the day before. That stability came as a market players looked forward to the imposition of new US tariffs due at 2000 GMT. Concerns that the imposition of these tariffs could potentially escalate global trade tensions and consequently impact crude demand are weighing on the market. Brent crude futures were steady at $74.49 a barrel by 0622 GMT, while US West Texas Intermediate crude futures gained 3 cents to $71.23 a barrel. The White House confirmed that President Trump on Monday will announce new tariffs, but it did not say on how much or what. Analysts said the prevailing sentiment toward tariffs was one of uncertainty about their potential impact on global trade dynamics.
How Tariffs Could Impact Oil Demand: An Analysis
Market analysts have commented on the implications of the new US tariffs upon the oil price. “There are many people who say the tariffs can be downward on the price of oil, mostly because the tariffs are global on the demand side,” he said. This view reflects a potentially weaker economy in response to higher trade barriers. The rest of the market also focused some attention on the fairly positive demand signals coming out of mainland China, which have helped provide some counterbalance. The composition of possible results of the tariff announcement was somewhat far-fetched. But analysts said that if tariff measures turned out to be weaker than anticipated, they would not give a significant boost to a rally in Brent crude prices. However, anything more aggressive than what the market is expecting could trigger an even stronger reaction by the market. Fears that the tariffs could disrupt global trade flows were also top of mind.
What Would a Secondary Tariff and Geopolitical Differences You Consider?
The market was also factoring in potential secondary tariffs against Russian oil, alongside the initial tariff announcement. And the flexibility of these new tariffs injected further uncertainty into the market’s ability to predict where oil prices would head in the future. At the same time, as the tariff talks continued, the market watched the US administration’s unfolding “maximum pressure” campaign against Iran which has involved sanctions that target a reduction in Iranian oil exports. The aforementioned factors geopolitically added to the aggregate market ecosystem. We also discussed the possibility of a Russia-Ukraine ceasefire if the tariff pressures do their work. Here, though, punitive measures may be more transitory than persistent, and tariffs could be supportive to crude, if bearish to refiners. The market was also aware of potential retaliation from large oil importing countries over the proposed tariffs.
Data on US Crude Inventories and the Interplay in the Market
The market was also reacting to the latest US oil and fuel inventory signals that painted a mixed picture of supply and demand dynamics. US crude oil stocks climbed for a fourth week, adding 6 million barrels for the week to March 28, sources said, citing data from the American Petroleum Institute. In contrast, gasoline supplies declined by 1.6 million barrels and distillate stocks dropped by 11,000 barrels. U.S. crude oil stockpile data from the Energy Information Administration (EIA) was due later in the session. These levels of inventory provided a glimpse into the balance of supply and demand in the US oil market, a key influence on global oil prices.
Market Sentiments and Trading Volumes
Oil market trading was said to be subdued, a sign of some caution in the market. Brent crude June delivery contracts changed hands at 13,936 lots at 0623 GMT, compared with open interest of 672,617 lots for the same month in the contract, according to ICE data on the LSEG pricing platform. Many attributed the thinner trading volumes to traders taking a wait-and-see approach ahead of more information on the US tariffs announcement. The overall market tone was cautious, as traders focused on events that could shape the direction of oil prices going forward. Market was still watchful of any news, and data on direction of oil for short-term.
