Oil prices declined on Friday but remained near their one-month high amid rising supply risks after the U.S. imposed tariffs against countries buying oil from Venezuela and placed additional pressure on Iranian oil trade.
As of 6:44 GMT, Brent crude futures lost 0.12 percent to $73.94 a barrel, while U.S. West Texas Intermediate crude futures were down 0.11 percent to $69.84 a barrel. The declines were minor compared with the gains of over 2 percent for both contracts so far this week. They are up more than 7 percent since hitting multi-month lows in early March.
Global supply outlook tightens
The main driver behind the latest oil price rally has been the shifting landscape of global oil sanctions. On Monday, U.S. President Donald Trump announced new 25 percent tariffs on buyers of Venezuelan crude. This came only days after new U.S. sanctions targeted China’s oil imports from Iran. These decisions raised uncertainty among buyers and impacted Venezuelan oil flows to top buyer China.
Oil prices were also supported by signs of better demand in the U.S., the world’s top oil consumer, as the country’s crude stocks fell more than anticipated. 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.
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Trump’s auto tariffs to impact demand
However, concerns that Trump’s auto tariffs could slow oil demand impacted prices this week. In the previous session, oil prices declined as traders and investors were assessing the impact of Trump’s latest announcement of a 25 percent tariff on imported cars and light trucks.
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.
Markets are now expecting a period of heightened uncertainty with Trump gearing up to implement reciprocal tariffs on April 2, which could raise inflation, impact economic growth and oil demand, and escalate trade tensions on a global scale.
