DTN Oil Update
Oil Futures Mixed Amid Tariff Concerns, OPEC+ Output Hike Outlook
HOUSTON (DTN) -- Oil futures dipped on Tuesday as trade tariffs on Canada and Mexico went into effect Tuesday, raising concerns about their impact on the global economy and further inflationary pressure on the U.S. economy.
The NYMEX WTI and ICE Brent futures contracts for May delivery settled steady at $68.37 bbl while the front-month ICE Brent fell by $0.49 to $71.13 bbl. The RBOB futures contract for April delivery rose by $0.0075 to $2.1953 gallon and the April ULSD futures contract rose by $0.0284 to $2.288 gallon.
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The U.S. Dollar Index recorded a steep multi-week drop, by falling 1.03% to 105.64 against a basket of foreign currencies.
The Trump administration imposed an additional 25% tariffs on imported goods from Canada and Mexico, its main trade partners, as a way to pressure both countries to stop illegal immigration and drug trafficking at their borders with U.S. territory. Effective Tuesday, March 4, the United States levied 10% tax on imports from China. Retaliatory measures from China and Canada were immediately imposed, while Mexico is expected to announce a retaliatory trade tariff on Sunday.
The uncertainty about the impact of these actions continued to generate high volatility in the oil futures markets, which bounced back from losses recorded in the morning when they hit their lowest level since December.
The two crude benchmarks WTI and Brent were also under downward pressure due to expectations of ample global supplies after the eight OPEC+ countries -- Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman -- on Monday, March 3, agreed to a gradual and flexible increase of 2.2 million bpd its global output starting April 1.
OPEC+ is also expected to extend voluntary adjustment cuts of 1.65 million bpd, announced in April 2023, until the end of December 2026.
In January, Trump demanded Saudi Arabia and OPEC to lower oil prices, claiming that this could help end the war in Ukraine.
Oil futures market recovered from losses reported earlier on the day on news that the Department of the Treasury formally canceled Chevron's permit to produce and export Venezuelan crude. This is seen as a political tactic from the Trump administration to pressure the government President Nicolas Maduro.
