Oil Steady as Tariffs Loom, US Growth Soft
West Texas Intermediate (WTI) crude prices remained stable below $73 a barrel, despite earlier gains of up to 1.3% amid a weakening dollar.
Trump's commerce secretary nominee, Howard Lutnick, stated that Canada and Mexico may avoid tariffs if they address illegal immigration and fentanyl concerns. Previously, penalties were expected to take effect over the weekend.
US economic data revealed weaker-than-anticipated growth last year, reinforcing expectations of Federal Reserve interest rate cuts in March. This boosted equities and weakened the dollar, enhancing the appeal of dollar-denominated commodities.
Canada exports around 4.1 million barrels of crude daily to the US, with its volatile pricing recently exacerbated by tariff threats before recovering following Lutnick's comments. Mexico remains the second-largest supplier.
Oil prices have fluctuated this year, initially rising on high demand due to cold weather and the Biden administration's sanctions on Russian flows. However, gains have waned as Trump urged OPEC to lower prices.
In addition to the tariff threat, traders are investing in Middle Eastern oil markets to compensate for Russian sanctions. Open interest in the Brent-Dubai spread on ICE reached a record, indicating increased activity.
Production at Iraq's Rumaila field remains limited at 900,000 barrels per day following a fire. Crude flows from Russia's Ust-Luga port have seemingly halted after a Ukrainian drone strike.