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Main Points
- Oil contract costs have plunged, approaching multi-year lows, as the oil market assesses President Trump’s import duty strategies on significant trading allies and the impending OPEC+ output rise strategy.
- Market players are worried that tariffs on products from Canada, Mexico, and China, which became effective yesterday, might speed up inflation in the United States and impede economic expansion across North America, negatively impacting oil demand.
- OPEC+, spearheaded by Saudi Arabia, revealed on Monday intentions to progressively raise oil output beginning in April, eliminating production cuts enacted since November 2023.
Crude oil futures declined considerably on Wednesday, nearing multi-year lows, because of worries about US tariffs and the surprising OPEC+ output increase declaration, which stunned commodity markets.
The US WTI crude oil benchmark decreased as much as 4% on Wednesday to $65.22 a barrel, near its lowest level since late 2021. Stocks of US energy firms, including ConocoPhillips (COP) and ExxonMobil (XOM), also mirrored the decline in crude oil prices.
Over the past few days, the oil market has been increasingly troubled by President Trump’s announcement yesterday to impose a 25% duty on goods from Canada and Mexico and to double duties on Chinese imports to 20%. TruBit Collaborates with Morpho to Introduce DeFi Unearned Revenue in Latin America
In late January, when Trump initially threatened to impose duties on imports from Canada and Mexico, oil costs briefly rose due to concerns that duties would limit supply. However, market participants are increasingly concerned that duties and potential retaliatory actions could damage the global economy.
It is generally anticipated that duties will slightly accelerate inflation in the United States in the short term and slow economic growth. The effect of duties on the economies of Canada and Mexico is anticipated to be more substantial, and may even drive these two countries with large oil markets into recession.
Following OPEC+’s choice to raise oil output beginning in April, oil values plunged right away on Monday. This steady rise will gradually eliminate the production restrictions that the major oil-producing group committed to in November 2023.
Rising petroleum values worsen inflation, as seen by greater petrol rates for motorists and greater production and transportation fees for businesses. According to research, oil values also have an impact on inflation expectations, which is a key element in real price increases. A major focus of Trump’s campaign the previous year was lowering oil and gas rates. During his presidency, oil values steadily declined, with West Texas Intermediate (WTI) crude oil falling by around 15% since he took office, and petrol rates also falling slightly over the previous month. He vowed that the United States would “increase attempts to extract oil,” hence lowering transportation expenses and ultimately controlling inflation.
Rising petroleum values worsen inflation, as seen by greater petrol rates for motorists and greater production and transportation fees for businesses. According to research, oil values also have an impact on inflation expectations, which is a key element in real price increases.
