Brent gains amid uncertainty over US tariffs

The front-month ICE Brent contract has gained $0.73/bbl on the day, to trade at $76.91/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent crude reversed the previous day’s losses as oil investors focused on the chances that the US could impose 25% tariffs on all imports from Canada and Mexico starting tomorrow. The two countries, which are still the US’ biggest trading partners, could avoid new levies if they act on illegal migration and fentanyl drug flows, US President Donald Trump has said.

“Crude oil prices fluctuated as investors contemplate the likelihood of US tariffs alongside a flurry of executive orders and policy announcements,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Besides, Brent’s price found some support after the European Central Bank (ECB) cut its key interest rate by 25 basis points to 2.75% at the bank’s 26-member rate-setting council meeting today.

Lower interest rates can make the greenback weaker against other currencies and boost demand growth for dollar-denominated commodities like oil.

Downward pressure:

Oil demand growth concerns in the US has capped some of Brent’s price gains this week.

Commercial US crude oil inventories gained 3.5 million bbls to touch 415 million bbls for the week ending 24 January, according to data from the US Energy Information Administration (EIA).

The gain in US crude stocks was the “first weekly build reported since November,” two analysts from ING Bank remarked. The EIA report was “fairly bearish,” they added.

A surge in US crude stocks can indicate a drop in oil demand, which can contribute to cap Brent's price rise. This was the first weekly rise in inventories this year.

By Aparupa Mazumder

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