Baghdad, Iraq- Oil prices extended their recent gains on Tuesday, supported by a report revealing that Russian oil production had fallen short of its OPEC+ quota. However, the rise in prices was somewhat limited by growing concerns over escalating trade tariffs that could negatively impact global economic growth.
By 0447 GMT, Brent crude futures had risen by 24 cents, or 0.32%, reaching $76.11 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude increased by 19 cents, or 0.26%, to $72.51 per barrel. Both contracts had previously posted a nearly 2% rise after three consecutive weeks of losses.
The upward movement in prices was driven by signs of tightening oil supplies. According to analysts from ANZ, Russian oil production in January had fallen 16,000 barrels per day (bpd) short of its OPEC+ production target, amounting to a total output of 8.962 million bpd. This shortfall eased concerns about an oversupply of crude on the market.
Adding to these supply concerns, analysts also noted increased tensions regarding the shipping of Russian oil to key importers like China and India, both of which have faced disruptions due to U.S. sanctions on Russian tankers, producers, and insurers. Moreover, a report suggesting that European countries are planning to seize Russia’s “shadow fleet” further fueled fears of continued supply disruptions.
The uncertainty surrounding oil supplies was compounded by U.S. sanctions on networks shipping Iranian oil to China, as the U.S. administration ramps up its “maximum pressure” campaign on Iranian oil exports.
Despite these factors supporting higher oil prices, concerns over global economic growth capped further gains. The latest move by U.S. President Donald Trump to raise tariffs on steel and aluminum imports could potentially dampen demand for crude oil. The 25% tariff on steel and aluminum imports, affecting countries like Canada, Brazil, Mexico, and South Korea, has raised the specter of a multi-front trade war, which could hurt global demand for energy.
Additionally, Trump’s recent decision to impose 10% tariffs on Chinese goods added another layer of uncertainty, with Beijing retaliating by introducing its own tariffs, including a 10% duty on crude oil imports from the U.S.
Meanwhile, concerns about the U.S. Federal Reserve’s monetary policy also loomed over oil prices. With inflationary pressures mounting under Trump’s economic policies, economists now expect the Fed to hold off on rate cuts until later in the year. This delay in monetary easing could limit economic growth, which, in turn, could suppress demand for oil.
U.S. oil and gasoline stockpiles were expected to have risen last week, although a Reuters poll indicated that distillate inventories likely fell. The results of these stockpile reports, due later this week, are expected to provide further insight into supply and demand dynamics in the U.S. oil market.
