Oil Steady as Investors Assess US Trade Threats and Russia Moves
(Bloomberg) -- Oil steadied after President Donald Trump escalated the trade war, with threats of 30% tariffs on goods from the European Union and Mexico hurting appetite for risk and the outlook for energy demand.
Global benchmark Brent was little changed above $70 a barrel, after rising 3% last week, while West Texas Intermediate was above $68. US equity-index futures dropped after the latest tariff threats, which followed US trade measures against nations from Canada to Brazil and Algeria last week.
At the same time, investors were on alert for a “major statement” from Trump on Russia later Monday that may see him address the war in Ukraine and US sanctions policy. Ahead of that, the president told reporters in the US on Sunday that Washington would send Kyiv more weapons.
Oil remains more than 5% lower this year, with the market at a complicated juncture. Geopolitical tensions in the Middle East have eased following the Israel-Iran conflict, weighing on prices, while the US-led trade war is ratcheting up with the slew of fresh threats from Trump. Elsewhere, OPEC+ has been relaxing supply curbs at a rapid clip, reinforcing concerns about a crude glut, although delegates have said a pause may be in the offing.
Still, some metrics suggest near-term conditions remain supportive. Brent’s prompt spread — the gap between its two nearest contracts — remains more than $1 a barrel in backwardation, a bullish pattern. Among products, meanwhile, stockpiles of US distillates — a category that includes diesel — have dropped to the lowest level since 2005.
“Prices will see a higher floor level in the third quarter, with a bullish bias amid short-term volatility,” said Gao Mingyu, chief energy analyst at SDIC Essence Futures Co. “US potential expanded sanctions on Russia are causing worries in the market. However, the Aug. 1 trade tariffs may turn out to be watered down compared to the April round.”
Later this week, investors will get insights into crude’s outlook as OPEC is scheduled to release its monthly market analysis on Tuesday. On the demand-side, China — the world’s largest oil importer - will release economic growth and industrial production figures the same day, offering insights into conditions faced by the nation’s refining industry.
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