Oil prices rose on Monday following three consecutive weeks of declines, even amid U.S. President Donald Trump‘s recent announcement regarding tariffs on all steel and aluminum imports.
At 20:41 ET (01:41 GMT), Brent oil futures climbed 0.5 percent to $75.06 per barrel, while crude oil WTI futures for March delivery increased by 0.6 percent to $71.13 per barrel. Both contracts experienced a nearly 2 percent drop last week, attributed to a significant rise in U.S. crude stockpiles and Trump’s commitment to enhance production.
Chinese tariffs on tap, Trump signals levies on steel and aluminum imports
The implementation of a 10 percent tariff on Chinese imports by the U.S. has prompted retaliatory actions from China, including tariffs on U.S. oil, liquefied natural gas (LNG), and coal. China’s counter-tariffs are scheduled to take effect later today.
In addition to the tariffs on Chinese goods, Trump announced on Sunday that the U.S. has imposed a 25 percent tariff on all steel and aluminum imports. These metals are crucial for the construction of pipelines, storage tanks, and other infrastructure vital to the oil industry. The rising costs for these materials may lead to increased expenses for energy companies, potentially hindering infrastructure projects and impacting the overall supply chain.
The ongoing trade disputes and the imposition of tariffs contribute to a complicated environment within the global oil market, which may have significant implications for both supply and demand dynamics. The resulting uncertainty and the potential tightening of global supply are factors driving the current increase in oil prices.
Tariffs heighten inflationary concerns
The imposition of tariffs has amplified fears of inflation, as elevated import costs can result in higher prices for goods and services. Investors typically regard commodities like crude oil as hedges against inflation, which leads to increased demand and higher prices.
While the immediate effect of these tariffs on oil and gas prices might be limited, the broader consequences for the energy sector could be substantial.
China demand concerns grow on soft inflation
China’s recent inflation data for January paints a bleak picture regarding the country’s economic recovery, thereby applying downward pressure on global oil prices. The consumer price index (CPI) saw a moderate rise in January, while the producer price index (PPI) experienced continuous declines.
This data indicates ongoing weakness in both household spending and industrial activity, which are key drivers of oil demand in the world’s second-largest economy. A declining PPI suggests persistent challenges within the manufacturing sector, a significant consumer of crude oil. With Chinese factories contending with prolonged deflationary pressures, diminished industrial output is likely to restrict demand for oil and refined products such as diesel, further impacting prices.
Moreover, global markets are closely monitoring China’s policy response. Weak inflation may prompt Beijing to introduce additional stimulus measures, such as interest rate reductions or infrastructure investments, which could ultimately boost oil demand.
