By Oshadhi Gimesha, Lead Journalist | Reviewed and approved by Editor-in-Chief
SINGAPORE/HOUSTON — Oil prices rose for a second consecutive session on Tuesday, buoyed by tightening Russian and Iranian supplies, though concerns over escalating U.S. tariffs and delayed Federal Reserve rate cuts limited gains. Brent crude futures climbed 0.72% to $76.42 a barrel, while U.S. West Texas Intermediate(WTI) gained 0.69% to $72.82.
Key Details
- Price Recovery: Brent and WTI both surged nearly 2% on Monday, rebounding from three straight weeks of losses. Analysts attribute the uptick to technical buying and supply constraints.
- Supply Pressures:
- Russian Output: January production fell to 8.962 million barrels per day (bpd), 16,000 bpd below its OPEC+ quota, easing oversupply fears.
- Sanctions Disruptions: U.S. sanctions on Russian tankers and insurers have disrupted shipments to China and India, key importers.
- Iranian Exports: Fresh U.S. sanctions targeting Iranian oil networks to China threaten further supply tightening.
- Demand Risks:
- Trump Tariffs: A 25% U.S. tariff on steel/aluminium imports and 10% duties on Chinese goods risk triggering a multi-front trade war. China retaliated with a 10% crude tariff.
- Fed Policy: Most economists now expect rate cuts delayed until Q2, potentially stifling economic growth and oil demand.
Broader Market Context
Trade War Escalation:
- Trump’s tariffs, targeting allies like Canada and Mexico, mirror 2018 policies that sparked global market volatility. Analysts warn prolonged trade disputes could dent industrial activity and energy consumption.
Fed’s Inflation Challenge:
- With inflation risks rising under Trump’s policies, the Fed faces pressure to maintain higher rates, complicating efforts to balance growth and price stability.
Inventory Watch:
- According to a Reuters poll, U.S. crude and gasoline stockpiles are expected to rise, while distillate inventories likely fell last week. The API and EIA reports due Tuesday and Wednesday will provide clarity.
Analyst Insights
- Anh Pham, LSEG: “This rebound is driven by technical positioning after prices hit oversold levels. Fundamentals remain mixed.”
- ANZ Research Note: “Russian production cuts and Iranian sanctions are tightening physical markets, but tariffs and rates cloud the demand outlook.”
Why This Matters
- Global Energy Costs: Higher oil prices could reignite inflation, complicating central banks’ policy decisions.
- Trade Policy Risks: Escalating tariffs threatens to disrupt supply chains and slow industrial growth in key economies.
- Market Volatility: Investors face dual pressures from geopolitical supply risks and macroeconomic headwinds.
What’s Next
- OPEC+ Meeting: Focus turns to the group’s March 1 meeting, where extensions to production cuts may be debated.
- U.S. Inventory Data: API and EIA reports will test market sentiment this week.
- Trade Talks: Canada and Mexico are expected to challenge Trump’s tariffs at the WTO, prolonging uncertainty.
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