Onome Amuge
Oil traded bullish on Tuesday, fueled by growing concerns over possible disruptions in Russian and Iranian oil supply and sanctions threats, despite mounting apprehension over the potential adverse effects of escalating trade tariffs on global economic growth.
Brent crude futures rose by 98 cents to $76.85 per barrel, registering a 1.3 percent gain, while West Texas Intermediate (WTI) crude advanced by 92 cents to $73.24 per barrel, also representing a 1.3 percent increase.
The upward movement in oil prices came as a relief after three consecutive weekly declines, with both Brent and WTI futures gaining almost 2 percent each.
A combination of U.S. sanctions and supply disruptions escalated fears over global oil supplies, keeping oil prices buoyant.
U.S. sanctions targeting tankers, producers, and insurers involved in shipping Russian oil to major importers, including China and India, disrupted the flow of Russian crude, while U.S. sanctions on networks transporting Iranian oil to China added to the jitters.
The disruption of Russian and Iranian oil supply, coupled with Trump’s renewed maximum pressure campaign on Iranian exports, stoked concerns about global supply tightness.
Amid the heightened supply concerns, traders faced headwinds from the renewed trade hostilities ignited by President Trump’s steep tariff increase, which threatens to further erode global economic growth and subsequently hamper energy demand.
The U.S. President doubled tariffs on steel and aluminum imports from Canada, Brazil, Mexico, South Korea, and other major exporters to 25 percent with no exceptions, aiming to protect the domestic industries from foreign competition.
According to analysts, this policy shift, if sustained, is likely to trigger retaliatory measures from affected countries, further dampening global economic growth and hindering oil demand, thus weighing on oil prices.
In a note published on Monday, Morgan Stanley cautioned that the ongoing tit-for-tat tariff imposition, if left unchecked, has the potential to hamper the oil-intensive sectors of the global economy, particularly by clouding the demand outlook for oil.
However, Morgan Stanley predicted that the escalation of trade hostilities could potentially prompt the OPEC+ alliance to extend current production quotas, which would, in their view, address potential concerns about market balance in the second half of 2025.
