Oil prices declined on Friday, heading toward their weakest month since September, as concerns over U.S. trade tariffs and the potential for a Russia-Ukraine peace deal overshadowed worries about supply disruptions. Brent Oil Futures dipped 0.4 percent to $73.30 per barrel as of 21:38 ET (02:38 GMT), while West Texas Intermediate (WTI) crude futures fell 0.4 percent to $69.70 per barrel.
Oil prices on track for biggest monthly decline in 6 months
Both contracts, which are set to expire in April, are on course to decline more than 3 percent this month, marking their worst monthly drop since September. Additionally, both benchmarks are poised for their first monthly decline in three months.
On Wednesday, President Donald Trump revoked Chevron (NYSE:CVX)’s license to operate in Venezuela, effectively halting U.S. imports of Venezuelan crude, which averaged approximately 270,000 barrels per day earlier this year. This month, Trump also reinstated the “maximum pressure” campaign against Iran, aiming to reduce Iran’s oil exports to zero by targeting brokers, tanker operators, and shipping companies involved in the sale and transport of Iranian petroleum.
OPEC+ deliberations amid internal divisions
Simultaneously, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) are debating whether to proceed with a planned output increase in April 2025. The alliance, currently reducing output by 5.85 million barrels per day, faces internal divisions. Despite these concerns regarding tightened supply, oil markets are set for monthly declines, driven by uncertainties surrounding Trump tariffs and the potential for a Russia-Ukraine peace agreement.
A peace deal between Russia and Ukraine could result in the lifting of sanctions against Russia, thereby increasing global oil supply and putting downward pressure on prices.
US PCE inflation in focus for Fed rate cues
Recent U.S. economic indicators have raised apprehensions about a potential slowdown, further contributing to the downturn in oil prices. Data released on Thursday indicated a significant rise in initial unemployment claims for the week ending February 22. In a separate report, the U.S. Bureau of Economic Analysis provided its second estimate for the fourth quarter gross domestic product (GDP), confirming that the economy expanded at an annual rate of 2.3 percent during this period, a deceleration from the 3.1 percent growth observed in the third quarter.
Investors are now anticipating the upcoming release of the personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation. This crucial report could offer insights into the Fed’s interest rate trajectory at a time when it has maintained a hawkish stance due to persistent inflation. Typically, lower U.S. interest rates weaken the dollar, making oil cheaper for foreign buyers and boosting demand, which supports higher oil prices.
