Oil Set for Weekly Drop as Trump Tariffs Outweigh Iran Sanctions

Oil prices are on track for a third consecutive weekly decline as concerns about the impact of President Donald Trump’s tariffs on China are overshadowing the effects of newly imposed sanctions on Iran by the U.S. administration.

Impact of Tariffs on Oil Demand

West Texas Intermediate (WTI) is stabilizing around $71 per barrel, marking a nearly 3% drop this week, while Brent crude is trading above $74. The recent tariffs imposed by Trump on all imports from China have raised fears that this trade conflict may significantly reduce demand for oil. In response, China has announced its own set of tariffs, which will take effect shortly.

Sanctions on Iran

Despite the sanctions on Iran, which are expected to restrict oil exports from the country, the focus has shifted to the broader implications of the trade war. Analysts suggest that the U.S. intends to increase its own oil production to counterbalance any shortages resulting from the sanctions on Iran. With most of Iran's oil exports directed towards China, experts are watching closely to see if China's import levels will be influenced by the ongoing tariff discussions between the two countries.

Market Reactions

This week has seen fluctuating crude prices. The market initially reacted positively earlier this week when sanctions were introduced against Canada and Mexico—both major crude suppliers to the U.S.—but prices fell again after news emerged that these measures would be postponed. Such uncertainty has continued to drive prices lower, with many now predicting a potential surplus in oil supplies later in the year.

Physical Market Signals

Additional indicators suggest that the physical oil market is weakening. Prices in European markets have dropped significantly, attributed to maintenance work at refineries. Furthermore, the distribution of Brent crude has tightened, with the near-term contract price spread narrowing considerably from previous levels.

Technical Indicators

Despite the downward trend in prices, some technical analysis suggests that the recent decline may have been excessive, indicating that oil could potentially be oversold at this point.

Conclusion

In summary, while sanctions against Iran are a critical factor for the oil market, the overarching fear of reduced demand due to tariffs is shaping the current market direction. Investors and analysts will need to keep a close eye on both geopolitical developments and trade negotiations as they unfold in the coming weeks.

oil, tariffs, sanctions