Oil prices rose on Friday, benefiting from some dip buying, and were headed for a second week of losses as traders fretted over the prospect of trade tariffs under U.S. President Donald Trump.
Attention was also directed toward key U.S. PCE inflation data, due later in the day, for additional clues on interest rates. The dollar rose in anticipation of the data, which limited gains in oil.
The dollar was further strengthened by Trump threatening the BRICS group of countries—which includes top importer China—with 100 percent tariffs over their attempts to replace the U.S. dollar. He also confirmed on Thursday that his 25 percent tariffs on Canada and Mexico were set to take effect from Saturday.
Brent oil futures expiring in March rose 0.4 percent to $77.21 a barrel, while West Texas Intermediate crude futures increased by 0.5 percent to $73.13 a barrel by 20:33 ET (01:33 GMT). Both contracts were trading down between 1.7 percent and 2.3 percent for the week, marking their second consecutive week of losses.
Concerns over tariffs affecting global demand
Oil was primarily pressured by concerns that Trump’s tariffs will disrupt global demand, especially in top importer China, which has often been a target of Trump’s ire.
Skepticism about artificial intelligence fueling energy demand also weighed on oil prices, as did data showing a larger-than-expected build in U.S. inventories.
Trump tariffs on Canada and Mexico in focus
Trump stated on Thursday that he intends to advance his plans to impose 25 percent import tariffs on Canada and Mexico, citing their alleged role in the flow of illegal immigrants and fentanyl into America.
The U.S. President mentioned he was still considering whether oil imports would be included in the tariffs. Canada is the largest supplier of oil to the U.S., accounting for 60 percent of imports, while Mexico contributes 10 percent of U.S. oil imports.
Import tariffs on oil could significantly increase U.S. gasoline prices, particularly since Trump’s agenda to boost domestic production will take time to implement. The President could potentially avoid oil import tariffs due to concerns over the implications of higher inflation.
Nevertheless, any tariffs on oil are expected to diminish demand and further exert pressure on crude markets.
Trump has also threatened a 10 percent duty on China, which could come into effect from Saturday.
Read more: Oil prices rise 0.2 percent to $76.71 as traders absorb hawkish Fed signal, Trump tariffs
PCE data awaited for more rate cues
In addition to Trump’s actions, focus on Friday was also on key PCE price index data for December. This data is the Federal Reserve’s preferred inflation gauge and is likely to play a significant role in shaping expectations for interest rates.
The Fed had maintained steady rates this week and adopted a hawkish stance on future easing, citing concerns over persistent inflation and the inflationary effects of Trump’s policies.
