Oil Prices Dip as Trump's Executive Orders Raise Trade War Concerns

Introduction
Oil prices experienced a decline on Tuesday following President Donald Trump's signing of executive orders aimed at boosting U.S. production and hinting at tariffs on trading partners Canada and Mexico, igniting fears of a potential trade war.

Price Movements
West Texas Intermediate (WTI) crude futures (CL=F) fell by 2% to $76 per barrel, while Brent crude futures (BZ=F) dropped over 1% to approximately $79 per barrel.

Trump's Executive Orders
On his first day in office, President Trump declared a national energy emergency, expediting approvals for domestic oil and gas leasing, production, transportation, refining, and generation. Additionally, he signed an order to expedite permitting and leasing projects in Alaska to unlock its energy resources.

Potential Tariffs
President Trump's remarks indicating his intention to impose tariffs on Canada and Mexico starting February 1st have raised concerns about a trade war that could hinder economic growth and subsequently impact oil consumption. Goldman Sachs analysts caution that retaliation from U.S. trading partners is likely in the event of such tariffs.

Other Developments
President Trump also withdrew the U.S. from the Paris Climate Agreement and announced plans to replenish the Strategic Petroleum Reserve, which was depleted during the Biden administration due to elevated oil prices following Russia's invasion of Ukraine in 2022.

Market Outlook
Oil prices had commenced the year on an upward trend due to frigid temperatures in the Northern Hemisphere and the imposition of expanded U.S. sanctions on Russian energy. Year-to-date, WTI has risen by approximately 6%, while Brent crude has gained over 5%.