Traders are concerned about U.S. tariffs and rising oil supplies from OPEC+ production increases
Oil prices rose sharply on Thursday, rebounding from multi-year lows as the U.S. made some concessions on recent tariffs that helped bolster risk appetite. However, traders remained apprehensive about the increased U.S. trade tariffs on China, Canada, and Mexico, along with the growing expectations of higher oil supplies following the Organization of Petroleum Exporting Countries and allies (OPEC+) agreement to increase production this week.
“Global financial markets remain on an emotional edge amid a constant flow of news from the Trump administration. In commodities, we have seen prices across several raw materials respond differently to the prospect of U.S. import tariffs and retaliatory measures by its main counterparts, including Canada, Mexico, and China. Crude oil trades lower amid fears that a global trade war may negatively impact global economic activity and, with that, demand for fuel products. Elsewhere, several U.S.-produced farm goods traded lower after top buyer China placed levies on a number of U.S. produced products, including corn, soybeans, wheat, and cotton,” Ole Hansen, head of Commodity Strategy, Saxo Bank, told Economy Middle East.
Hopes for stimulus measures in China
In addition, optimism regarding potential stimulus measures in top importer China provided some support to oil markets, although the country’s economic outlook continued to be overshadowed by a looming trade war. Brent oil futures expiring in May climbed 0.5 percent to $69.66 a barrel, while West Texas Intermediate crude futures also increased 0.5 percent to $66.25 a barrel by 20:29 ET (01:29 GMT). Brent reached its lowest level since December 2021, and WTI fell to a near one-year low, as data revealed a larger-than-expected build in U.S. oil inventories, raising concerns that U.S. fuel demand was cooling.
Read more: Oil prices fall to $70.93 as China stimulus, U.S. inventories weigh
Oil markets relieved by some U.S. tariff exemptions
Oil markets, along with broader financial markets, experienced relief as U.S. President Donald Trump extended concessions to automakers regarding his recent 25 percent tariffs on Mexico and Canada. Trump announced that automakers would be granted a one-month period to adjust to these tariffs. Additional reports indicated that Trump was also contemplating exemptions for agricultural products such as potash and fertilizers.
These exemptions provided some comfort to markets, fostering hopes that the economic impact of Trump’s tariffs would be less severe than previously anticipated. Traders were also speculating that Trump might reduce the tariffs in response to both internal and external pushback. Nevertheless, Trump indicated that further tariffs, including reciprocal measures, would be imposed in early April.
Pemex looking for Asian, European buyers amid U.S. tariffs
Mexican state oil company Pemex is actively seeking potential buyers in Asia and Europe, including China, as it navigates the challenges posed by higher U.S. trade tariffs, according to a report from Reuters on Wednesday. The company exported more than half of its production to the U.S. in 2024, although these exports sharply declined in January as supply chains adapted in anticipation of the U.S. tariffs. Furthermore, the company appears to be ruling out the possibility of offering discounts to U.S. customers in light of the trade tariffs.
