Oil Hovers as Tariff Concerns Linger
Amid speculation over potential tariffs imposed by the Trump administration, oil prices remain largely unchanged.
Market Dynamics
West Texas Intermediate (WTI) has stabilized below $73 per barrel after an initial rise of 1.3% as the US dollar weakened. Howard Lutnick, Trump's nominee for Commerce Secretary, suggested that significant US trading partners Canada and Mexico could evade tariffs by addressing illegal migration and fentanyl concerns.
Economic Data and Market Impact
US economic data indicates slower-than-expected growth at the end of 2022, bolstering expectations of a Federal Reserve rate cut in March. Equities advanced and the dollar declined, increasing the appeal of commodities priced in the currency. However, the dollar has since recouped some losses.
Canada's Role and Volatility
Canada has exported an average of 4.1 million barrels per day to the US this month. Canadian crude prices have experienced volatility, with the discount to US oil widening due to tariff threats before recovering after Lutnick's comments.
Global Market Dynamics
Oil prices have faced a turbulent start to the year, initially rising due to increased demand in cold weather and the Biden administration's sanctions on Russian oil. However, gains have since moderated as Trump pressured OPEC to lower prices.
Traders have also been actively trading Middle Eastern oil markets amidst sanctions on Russia, driving up demand for barrels from the region. Open interest on the Brent-Dubai spread on ICE has surged to record levels, highlighting the extent of market activity.
Production and Infrastructure Updates
Oil production at Iraq's Rumaila field remains restricted to 900,000 barrels per day after a tank fire last week. Additionally, crude flows through Russia's Ust-Luga port have reportedly halted following a Ukrainian drone strike.