The price of oil saw daily gains on Friday following the implementation of new sanctions targeting Iran’s crude oil exports. However, concerns over President Trump’s renewed trade war with China and potential tariffs on other nations led to a weekly decline in oil prices.
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Brent crude futures settled at $74.66 per barrel, a 0.5% increase, but still on track for a more than 2% drop for the week. U.S. West Texas Intermediate (WTI) crude finished at $71.00 a barrel, a modest increase of 0.55%.
Geopolitical Tensions and Market Uncertainty
The newly announced sanctions on individuals and tankers involved in shipping Iranian crude oil to China provided some upward pressure on prices. This action represents an escalation of pressure on Tehran.
However, reports of planned tariffs by the Trump administration tempered the gains from the sanctions. According to John Kilduff, partner at Again Capital LLC, the market is navigating a complex landscape of sanctions, trade talks, and tariff threats emanating from the White House.
Oil barrels stacked on a cargo ship.
WTI remains near the $70 per barrel mark, which appears to be the lower bound of its current trading range, Kilduff noted. The impact of oil prices on presidential policy remains to be seen.
Market participants closely monitored President Trump’s statements throughout Friday, anticipating potential policy shifts that could rapidly reshape the oil market, according to Phil Flynn, senior analyst at Price Futures Group. Flynn aptly summarized the situation: “Trump giveth and Trump taketh away.”
Trade War Concerns Weigh on Demand Outlook
While sanctions typically bolster oil prices by introducing uncertainty, the current market response has been muted by demand concerns. As Michael Haigh, global head of commodities research at Societe Generale, explained, tariffs and retaliatory measures from other countries negatively impact global GDP and, consequently, oil demand.
The recently announced 10% tariff on Chinese imports, part of a broader effort to address the U.S. trade deficit, contributes to these concerns. Although plans for significant tariffs on Mexico and Canada have been suspended, the lingering threat of a trade war continues to weigh on market sentiment. Analysts at BMI highlighted in a Friday note that downside pressure on oil prices stems from tariff-related news flow, as fears of a potential trade war fuel anxieties about weakening oil demand.
A graph showing the fluctuation of oil prices.
Competing Forces Shape Oil Market Dynamics
Further complicating the picture, President Trump reiterated his commitment to increasing U.S. oil production, adding to trader unease. This statement followed a report of a larger-than-expected increase in U.S. crude inventories.
In conclusion, the oil market is currently grappling with competing forces. While new sanctions on Iran provide support for higher prices, concerns surrounding the ongoing trade war and its potential impact on global demand are keeping a lid on gains. The interplay of these factors will likely continue to shape oil market dynamics in the coming weeks.
