Brent inches lower as markets brace for the impact of US tariffs
The front-month ICE Brent contract has lost $0.47/bbl on the day from Friday, to trade at $76.44/bbl at 09.00 GMT.
PHOTO: Oil barrels. Getty Images
Upward pressure:
Brent’s price moved higher over the weekend after US President Donald Trump imposed up to 25% tariffs on imports from Canada, Mexico and China, with effect from 4 February.
For Canadian energy imports, the Trump administration decided to impose a tariff of only 10%. “Oil prices surged… after Trump imposed significant tariffs on various imports, including crude oil from Canada and Mexico, raising concerns about higher gasoline and diesel costs for US consumers,” analysts from Saxo Bank said.
Canada is a key oil supplier to the US, with the latter importing about 4 million b/d of crude from Canada, Reuters reports.
“This is the first wave of what promises to be a relentless trade offensive against friends and foes alike,” SPI Asset Management managing partner Stephen Innes remarked. “In response, Canada and Mexico wasted no time announcing their retaliatory tariffs on US products, signalling that this trade battle is about to escalate quickly,” he added.
Downward pressure:
Oil investors are now waiting to see the impact of the new tariffs imposed by the US. Market participants fear that this move could trigger a tariff war globally.
“With global markets bracing for impact, the question isn’t if more tariffs are coming—but who’s next in Trump’s crosshairs,” Innes remarked.
Trump is due to speak to Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum Pardo later today, according to reports.
Additionally, 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).
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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