Oil prices edged down on Thursday as traders weighed the impact of U.S. President Donald Trump’s latest auto tariffs. Despite supply concerns growing following U.S. tariff threats on Venezuelan oil buyers and earlier sanctions on Iranian oil buyers, the latest auto tariffs signaled a wider global trade war, impacting oil investor sentiment.
As of 6:38 GMT, Brent crude futures dipped 0.12 percent to $73.70 per barrel, while U.S. West Texas Intermediate crude futures fell 0.10 percent to $69.58 a barrel.
Sanction limit oil’s slide
This decline comes after oil prices rose by around 1 percent in the previous session on government data showing U.S. crude oil and fuel inventories fell last week and on the U.S. threat of tariffs on nations buying Venezuelan crude.
Traders and investors were assessing today the impact of Trump’s latest announcement of a 25 percent tariff on imported cars and light trucks on oil demand. The automotive industry is a significant consumer of energy, particularly oil. Tariffs that increase vehicle prices may suppress auto sales, potentially reducing manufacturing output and, consequently, the demand for oil products. They could also slow down the switch to electric cars.
In the past week, the U.S. administration tightened sanctions on the Iranian oil trading network, and this was followed by President Trump declaring that the U.S. will enforce a 25 percent tariff on any nation importing Venezuelan crude. Oil is Venezuela’s main export. China, already a target of U.S. import tariffs, is its largest buyer.
“This action indicates a definite change, potentially signalling the White House’s willingness to sacrifice low oil prices to achieve wider strategic objectives—isolating Iran and Venezuela and increasing pressure on China,” stated Ole Hansen, head of commodity strategy, Saxo Bank.
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U.S. crude inventories dip
U.S. oil and gas activity increased slightly in the first quarter, but energy executives were pessimistic about the sector’s outlook, a Dallas Fed survey showed, as other Trump tariffs on steel and aluminium could drive up costs for drilling and pipeline construction.
The U.S. Energy Information Administration (EIA) revealed on Wednesday that, for the week ending March 21, U.S. crude oil inventories decreased by 3.3 million barrels to 433.6 million barrels, a drawdown exceeding analysts’ expectations of a 956,000-barrel reduction. This decline suggested a tightening supply in the crude oil market.
Gasoline stocks also fell by 1.4 million barrels, but the decline was slightly less than analysts’ expectations of 1.8 million barrels. Meanwhile, distillate inventories, which include diesel and heating oil, fell 420,000 barrels, lower than the forecasted 1.6 million-barrel draw.
On the other hand, a maritime and energy ceasefire between Russia and Ukraine eased concerns about tighter global supply. The U.S. reached deals with Ukraine and Russia to pause attacks at sea and against energy targets, with Washington also attempting to ease certain sanctions against Moscow.
However, within hours of the truce talks, both Russia and Ukraine accused each other of breaking the U.S.-brokered agreement to stop attacking energy facilities, while the European Union said it would not accept Russia’s conditions for a proposed ceasefire in the Black Sea.