Oil prices have been climbing in recent days, despite sanctions on Russian and Iranian oil and concerns that Trump’s tariffs and the responses from other countries will lead to a global slowdown in economic growth. However, oil has been on the decline for a day now, following a Fed rate statement and reports of higher U.S. oil inventories.
There are concerns that Trump's import tariffs and the responses from other countries will lead to a global slowdown in economic growth. The US president made himself heard again this week with import tariffs of 25% on steel and aluminium, regardless of the country of origin. It is the umpteenth tariff threat from Trump, of which he has only actually imposed an additional 10% import tariff on China so far. The general expectation is that high import tariffs will also not benefit the US economy. The European Commission responded: "By imposing import tariffs, the US is taxing its own citizens, driving up the cost of doing business and fuelling inflation. In addition, tariffs increase economic uncertainty and disrupt the synergies and interconnectedness of global markets."
Sanctions on Russian and Iranian oil
Furthermore, Politico reported this week that countries including Finland, Lithuania, Estonia and Latvia are planning to further restrict Russia’s shadow fleet (ageing tankers with unclear ownership) following incidents in the Baltic Sea. The measures would include seizing tankers on environmental grounds and for piracy, according to anonymous sources.
The US also wants to impose sanctions, but with Iran as the target. The US Treasury Department is going to impose sanctions on a number of individuals and tankers that make it possible to ship millions of barrels of oil per year from Iran to China, reports news agency Reuters. Trump wants to reduce Iran's oil exports to zero.
Meanwhile, the ceasefire between Hamas and Israel in the Gaza Strip is faltering after the former stopped releasing hostages.
Despite these price-depressing factors, the oil price climbed from 5 to 11, only to take another step down. At the time of writing (Wednesday afternoon, February 12), the oil price is $75,86. That is still higher than last Wednesday ($74,61), but still a clear step below the $77 seen last Tuesday (February 11).
Fed chief confirms delay in rate cut
Fed Chairman Jerome Powell made his first visit to Congress since Trump's inauguration on Tuesday (Feb. 11). He said the U.S. economy is generally strong and reiterated that interest rate cuts will come at a slower pace this year. This, along with the (API) finding that U.S. oil inventories have increased by 9 million barrels, caused oil prices to fall, analysts said.
OPEC+ released its monthly report on Wednesday. The organization maintained its forecast for global oil demand and did not change its plans to cut oil production. In its February outlook published this week, the U.S. Energy Agency (EIA) said it expects OPEC+ production cuts to keep oil prices around current levels throughout the first quarter of 2025. Then, the EIA said, gradual production increases combined with weak global economic growth will increase oil inventories and put pressure on prices in the second half of 2025 and 2026. The agency predicts oil prices will average $74 per barrel in 2025 and $66 in 2026.