Oil prices held steady yesterday as investors adopted a cautious, wait-and-see stance after US President Donald Trump threatened to impose secondary tariffs on buyers of Russian oil and warned Iran of possible military action if it did not agree to a deal over its nuclear programme.
The more active June Brent crude futures climbed 11 cents, or 0.15 per cent, to $72.87 a barrel in the afternoon yesterday, while US West Texas Intermediate crude was up 8 cents, or 0.12pc, to $69.44 a barrel. Front-month Brent, trading at $74.06, was set to expire later yesterday.
Oil prices dropped earlier in the session before recovering and stabilising at current levels.
“(Trump’s) threat on secondary tariffs on Russia and Iranian oil is a factor oil market participants are tracking, although he has indicated he is not planning to introduce them for now,” said UBS analyst Giovanni Staunovo. “But, there is a rising risk of larger supply risks down the road.”
Trump said on Sunday he was “pissed off” at Russian President Vladimir Putin and will impose 25pc-50pc secondary tariffs on buyers of Russian oil if he feels Moscow is hindering his efforts to end the war in Ukraine.
China and India are major buyers of Russian crude and their acquiescence would be crucial to making any secondary sanctions package seriously hurt exports from the world’s second largest oil exporter.
Trump also threatened Iran on Sunday with bombing and secondary tariffs if Tehran did not come to an agreement with Washington over its nuclear programme.
Some analysts believe that Trump may not act on his threats, a view that is putting a cap on oil prices.
IG analyst Tony Sycamore said the market felt Trump would not follow through.
If enacted, he said, the tariffs would be another step toward a trade war that would weigh on global growth and demand for crude oil.
Yesterday several Chinese traders were unfazed by the latest threat. Three who spoke with Reuters all said Trump’s constant brinkmanship meant they discounted what he said.
“We expect WTI to stay in a range of $65 to $75 for now as the market assesses the impact of Trump tariffs on oil supply and global economy, as well as the supply situation from the US and Opec+,” said Yuki Takashima, an economist at Nomura Securities.
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