DTN Oil Update
Oil Futures Drop Following Confirmation of Additional Tariffs
HOUSTON (DTN) -- Oil futures dipped Friday morning after U.S. President Donald Trump confirmed that his government will impose additional trade tariffs on imported goods from China, Canada and Mexico.
Analysts anticipate that this could have a negative effect on the U.S. economy by increasing inflationary pressure.
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The NYMEX WTI and ICE Brent futures contract for April delivery climbed by $0.77 to $69.58 bbl while the front-month ICE Brent rose by $0.82 at $73.22 bbl. The ULSD futures contract for March delivery increased by $0.0233 to $2.3726 gallon while March RBOB futures contract rose by $0.0164 to $1.9802 gallon.
The U.S. Dollar Index increased by 0.44% to 107.22 against a basket of foreign currencies.
The United States imposed a 10% tariff trade on imported goods from China and 25% on imports of aluminum and steel from Canada and Mexico this month. However, effective March 4, the Trump administration is expected to levy an additional 10% on Chinese imports, 25% on imported goods from Mexico and 10% on Canadian energy imports. Meanwhile, reciprocal trade tariffs are set to be levied on April 2.
The confirmation of these additional tariffs created bearish sentiment in the oil futures markets this morning, keeping the NYMEX WTI futures contract below the $70 mark.
The Biden and Trump administrations have imposed stricter sanctions on Russian and Iranian oil trades. This week, the U.S. government also announced the cancellation of Chevron's permit to produce and export Venezuelan oil starting this week.
These measures were expected to put upward pressure on oil prices, however, weak global demand and ample supplies of U.S. crude recently reported have maintained oil futures markets bearish instead, due to the uncertainty surrounding the impact of the trade tariff war on the global economy.
Additionally, the possibility of a ceasefire between Russia and Ukraine is also anticipated to bring plentiful supplies in the global market affecting the main crude benchmarks, which this week fell to their lowest level since December.
On domestic economic news, the Bureau of Economic Analysis reported Friday morning that the Personal Consumption Expenditure in January increased $221.9 billion or 0.9%, above 0.4% recorded in December. The figure was higher than the market expectation of 0.4%. The PCE index reflects changes in the prices of goods and services purchased by consumers in the United States.
