By Oil prices experienced minimal fluctuations on Thursday amidst a backdrop of market uncertainty.
Investors were apprehensive about the potential impact of tariffs threatened by US President Donald Trump on Mexico and Canada, the two largest oil exporters to the country.
These tariffs could disrupt the flow of oil and lead to price increases.
Arslan Ali, analyst at FXempire, said:
Crude oil prices held steady as markets assessed the potential impact of tariff measures on major energy suppliers.
Simultaneously, market participants were keenly awaiting the outcome of a meeting of OPEC+ producers next week, a group that includes members of the Organization of the Petroleum Exporting Countries (OPEC) and other major oil-producing nations.
The decisions made at this meeting regarding production levels and quotas could significantly influence global oil prices.
The combination of these geopolitical and supply-side factors created a tense and volatile atmosphere in the oil market, with traders and investors closely monitoring developments and adjusting their positions accordingly.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $72.62 per barrel, unchanged from the previous close. Brent crude oil on the Intercontinental Exchange was down 0.1% at $75.52 a barrel.
US stockpiles increase
According to the US Energy Information Administration, crude oil inventories in the country increased by 3.5 million barrels per day for the week ended January 24.
The rise in stockpiles in the world’s biggest producer of crude oil, weighed on sentiments.
“At 415.1 million barrels, US crude oil inventories are about 6% below the five year average for this time of year,” the EIA said in its weekly report.
Meanwhile, gasoline stocks rose by 3 million barrels to 248.9 million barrels, while distillate inventories slumped by 5 million barrels to 124 million barrels, according to the data.
The rise in inventories indicated a drop in demand in the US last week after winter storms disrupted daily lives.
Trump’s Tariffs on Canada and Mexico
The Trump administration remains resolute in its decision to impose tariffs on Canada and Mexico, with White House spokeswoman Karoline Leavitt confirming to reporters on Tuesday that the tariffs will take effect on Saturday as planned.
However, there may be a way for Canada and Mexico to avoid these tariffs.
Howard Lutnick, Trump’s nominee for Commerce Secretary, stated on Wednesday that the tariffs could be avoided if both countries take swift action to curb the flow of fentanyl across their borders.
The impending tariffs have raised concerns about potential economic repercussions for both Canada and Mexico, as well as the possibility of retaliatory measures from both countries.
The situation highlights the Trump administration’s continued focus on border security and its willingness to use tariffs as a tool to achieve its policy objectives.
Possible price wars
Possibilities of an ensuing price war between world’s biggest oil producers, the US and Saudi Arabia was raised after Trump publicly called on OPEC to lower oil prices.
Oil prices, which had climbed to a six-month high last week with Brent trading over $80 per barrel, have dropped $7 per barrel since then.
Trump’s comment that Gulf nations must lower oil prices had weighed on sentiments.
“The flattening of the forward curve, on the other hand, is less of an indication that US President Trump’s appeal to OPEC is falling on receptive ears. If this were the case, the prices of contracts with longer maturities in particular would have fallen more sharply.” Carsten Fritsch, commodity analyst at Commerzbank AG, said.
After all, it is rather questionable whether Trump will find a lever to put Saudi Arabia under pressure.
OPEC+ is sitting on a massive oil spare production capacity, and is scheduled to raise oil output from April.
“Analysts remain skeptical of a potential price war between major producers, noting that an oversupply scenario could drive Brent crude prices below $50 if spare capacity is aggressively deployed,” Ali said.
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