DTN Oil Update

Oil Futures Dropped, USD Dipped on Tariffs Fear

HOUSTON (DTN) -- The NYMEX WTI futures contract for February delivery and the March Brent futures contract dropped nearly $2 on Monday, despite a weakening of the U.S. dollar following the confirmation that Trump's administration will impose trade tariffs on imported goods from China, Mexico and Canada.

U.S. President Donald Trump instructed the Secretary of Commerce and the U.S Trade Representative to start an investigation of "unfair trade practices by other countries", as part of several executive orders signed in his first day in office. The results of the review should be reported on April 1.

"We expect the U.S. administration to use targeted tariffs to gain concessions, possibly delaying implementation, as tariffs will negatively impact U.S. consumers and the economy," said Inga Fechner, senior economist for ING Research in a note.

The expectation of global trade tariffs to be imposed by the U.S. put pressure on the U.S. Dollar Index, which fell by 0.92% to 108.285 against a basket of foreign currencies.

Meanwhile, the confirmation that the Trump administration has approved increasing oil and gas drilling activity in the U.S. contributed to set a bearish tone in the oil futures market, as abundant supplies would impact crude oil prices, amid a sluggish global demand outlook.

The NYMEX WTI futures contract for February delivery dropped by $2.13 to $75.75 bbl while the March ICE Brent futures contract fell by $1.40 to $78.75 bbl. Downstream, the February RBOB futures contract dropped by $0.0884 to 2.5326 gallon and ULSD futures contract for February delivery fell by $0.0229 to $2.0893 gallon.

Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com