[NEW YORK] Oil prices fell on Friday (Mar 28) on worries that US tariff wars could spark a global recession, but gained for a third consecutive week after Washington ratcheted up pressure on the Organization of the Petroleum Exporting Countries (Opec) members Venezuela and Iran.
Brent crude futures fell US$0.40, or 0.5 per cent to settle at US$73.63 a barrel. US West Texas Intermediate crude futures (WTI) fell US$0.56, or 0.8 per cent, to close at US$69.36 a barrel.
US President Donald Trump plans to announce reciprocal tariffs targeting a wide range of imports, effective on Apr 2.
The trade war has investors worried about a potential recession, JPMorgan analysts told clients.
“Concerns about a trade war, coupled with elevated US policy uncertainty, are weighing heavily on sentiment,” they said.
Although recession risk was elevated, high-frequency oil demand indicators have held up relatively well for now, JPMorgan noted.
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Mid-week data from the Energy Information Administration showed US crude inventories fell by 3.3 million barrels to 433.6 million barrels last week, compared with analysts’ expectations in a Reuters poll for a 956,000-barrel draw.
On a weekly basis, Brent futures gained 1.9 per cent, while WTI rose 1.6 per cent. Since hitting multi-month lows in early March, Brent is up more than 7 per cent, and WTI has rebounded over 6 per cent.
“The key theme this week was the Trump administration ratcheting up the pressure on the Maduro regime in Venezuela,” Barclays analyst Amarpreet Singh said.
Trump on Monday announced new 25 per cent tariffs on potential buyers of Venezuelan crude, days after US sanctions targeting China’s imports from Iran.
The measures could exacerbate an anticipated 200,000 barrel per day decline in Venezuelan crude oil output this year, Singh said.
It has compounded uncertainty for buyers and saw trade of Venezuelan oil to top buyer China stall. Elsewhere, sources said India’s Reliance Industries, operator of the world’s biggest refining complex, will halt Venezuelan oil imports.
Oil markets are readjusting global supply expectations as a result of US sanctions against Venezuela and Iran, with Trump having promised to drive the latter’s oil exports to zero. The US has issued four rounds of sanctions targeting Iran’s oil sales since Trump’s return to the White House.
The second quarter should be tighter than originally thought, StoneX analyst Alex Hodes said. “If there are reductions in Venezuelan or Iranian crude oil barrels on the market this would certainly be a bullish development.”
The Opec+ group is set to begin its programme of monthly increases to oil production in April. The group, which comprises Opec and allies led by Russia, will likely continue to raise oil output in May, Reuters reported on Monday. REUTERS
