NEW YORK: Oil prices extended gains on Tuesday amid concerns over Russian and Iranian oil supply and sanctions threats despite worries that escalating trade tariffs could dampen global economic growth. Brent crude futures were up $1.20, or 1.6%, at $77.06 a barrel by 1409 GMT while US West Texas Intermediate crude rose $1.11, or 1.5%, to $73.43.
Both contracts registered gains of close to 2% in the previous session after three consecutive weekly losses. “With the US bearing down on Iranian exports and sanctions still biting into Russian flows, Asian crude grades remain firm and underpin the rally from yesterday,” said PVM oil analyst John Evans.
Shipping of Russian oil to leading importers China and India has been significantly disrupted by US sanctions targeting tankers, producers and insurers.
Adding to supply jitters are US sanctions on networks shipping Iranian oil to China after President Donald Trump restored his “maximum pressure” on Iranian oil exports last week.
Equinor’s Johan Sverdrup oilfield in the North Sea has suffered a power outage that is expected to last until 1615 GMT on Tuesday, a regulatory statement posted on the Nord Pool web site showed. But price gains were kept in check by Trump’s latest trade tariffs, which could dampen global growth and energy demand. On Monday Trump raised tariffs on steel and aluminium imports to the US to 25% “without exceptions or exemptions” in measures that could trigger a multi-front trade war.
The tariff will hit millions of tons of steel and aluminium imports from Canada, Brazil, Mexico, South Korea and other countries. “Tariffs and counter-tariffs have the potential to weigh on the oil-intensive part of the global economy in particular, creating uncertainty over demand,” Morgan Stanley said in a note on Monday. “However, we think this backdrop will probably also cause OPEC+ to extend current production quotas once again.” Trump last week introduced additional 10% tariffs on China, for which Beijing retaliated with its own levies on US imports, including a 10% duty on crude oil.
Also weighing on crude demand, the US Federal Reserve will wait until the next quarter before cutting interest rates again, according to a majority of economists in a Reuters poll. Keeping rates at a higher level could limit economic growth, which would curb oil demand growth. US crude oil and gasoline stockpiles were expected to have risen last week while distillate inventories are likely to have fallen, a preliminary Reuters poll showed on Monday.
The poll was conducted ahead of weekly reports from the American Petroleum Institute, due at 4:30 p.m. ET (2130 GMT) on Tuesday, and an Energy Information Administration report on Wednesday.
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