Oil prices witnessed a significant drop on Monday following U.S. President Donald Trump’s renewed calls for the Organization of the Petroleum Exporting Countries (OPEC) to reduce crude prices. Additionally, his decision to impose tariffs on Colombian goods caused further unease in the markets.
Weak PMI data from China affects oil markets
The oil markets also faced pressure from disappointing purchasing managers index (PMI) data released by China, the top importer, which indicated that local business activity continues to struggle. Prices were already reeling from substantial losses incurred the previous week, post Trump’s declaration of a national emergency. This declaration included a strong push for an increase in U.S. energy production, along with renewed demands for OPEC to lower crude prices.
Brent oil futures set to expire in March plummeted 1.2 percent to $77.59 a barrel, while West Texas Intermediate crude futures also dropped 1.2 percent to $73.76 a barrel by 20:48 ET (01:48 GMT).
Trump imposes tariffs on Colombia, calls for lower oil prices
President Trump enacted a 25 percent import duty on all Colombian products after Bogota denied landing rights to two U.S. military planes carrying migrants. This action heightened fears that Trump might fulfill his threats to impose trade tariffs on other significant economies, including Canada, Mexico, and China.
The United States is Colombia’s largest export market, particularly for its oil, although Colombian crude exports only represent a small portion of total U.S. oil consumption.
Trump also reiterated his demand for OPEC to lower oil prices, suggesting that such a reduction would negatively impact Russia’s revenue streams and potentially halt the ongoing Russia-Ukraine conflict.
OPEC has announced plans to gradually increase production starting in April, as it begins to unwind the output cuts that have been in place for the past two years. However, these curbs have only provided temporary support to oil prices.
Outgoing Biden administration’s sanctions on Russia’s oil industry
The previous Biden administration had also implemented stricter sanctions targeting Russia’s oil sector, although these measures were expected to have a minimal effect on Russia’s oil revenues, given the country’s robust buyer base in Asia.
Oil markets were further pressured by weak PMI data from China, revealing that manufacturing activity unexpectedly contracted in January, while growth in non-manufacturing activities slowed significantly. The data indicated that local businesses had only received limited benefits from recent stimulus measures enacted by Beijing, suggesting that China may need to take additional steps to bolster its economic growth.
These readings came just days after Trump threatened to impose a 10 percent tariff on China, which could place additional strain on its economy and diminish its demand for crude. China, being the world’s largest oil importer, has become a crucial focal point for crude markets amid a steady decline in economic growth over the past three years.
