DTN Oil Update
Oil Futures Down Due to Trade Tariff Concerns
HOUSTON (DTN)-- Oil futures settled down on Wednesday due to uncertainty about the potential impact of a trade tariff war on the global economy and the effect of higher U.S. oil production on an already oversupplied market.
The NYMEX WTI futures contract for February delivery fell by $0.43 to $75.40 bbl while the March ICE Brent futures contract dipped by $0.36 to $78.93 bbl. The RBOB futures contract for February delivery fell by $0.0274 to $2.0569 gallon while February ULSD futures fell by $0.0188 to $2.5393 gallon.
In the opposite direction, the U.S. dollar index rose by 0.17% to 108.040 against a basket of foreign currencies.
Trump's proposal to impose trade tariffs on imported goods from China, Canada and Mexico has raised concerns about the potential consequences of these actions. Analysts anticipate that a 60% tariff on Chinese imports and 25% for products manufactured in Mexico and Canada could lead to higher prices and inflationary pressures on the U.S. economy.
Higher trade tariffs are also expected to affect imports of Mexican and Canadian crude oil, which could negatively impact refining margins for U.S. producers.
However, the timing of the implementation of these tariffs remains unclear and brings more volatility to the markets.
Additionally, the Trump administration's proposal to increase domestic oil and gas production in the U.S. could have a negative effect on global markets as the increased supply will keep oil prices under pressure, particularly with global demand remaining weak, especially from China.
Downstream, despite ample inventories being reported in recent weeks, gasoline and diesel prices rose last week due to a surge of demand driven by severe weather conditions across the U.S.
The national average for retail regular gasoline jumped 6.6cts to a 13-week high $3.109 gallon as of Monday (1/20), 4.7cts more than the same week in 2024, according to the latest data from the Energy Information Administration.
The U.S. average on-highway diesel fuel price rose a fourth consecutive week, surging 11.3 cents to $3.715 gallon as of Monday, the highest price since the week ended Aug. 5, 2024, the EIA said.
Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com