Oil Markets Await Clarity on Ukraine War and US Tariffs

Oil prices remained steady at the start of the week as investors analyzed the latest developments in Russia’s war in Ukraine and the upcoming US trade tariffs imposed by President Donald Trump.

• Brent crude traded near $73 per barrel after recording the biggest monthly loss since September.
• West Texas Intermediate (WTI) remained below $70 per barrel.

With European leaders working to form a “coalition of the willing” to support Ukraine, market sentiment remains uncertain regarding the potential US-brokered ceasefire and its economic implications.

Trump’s Diplomacy with Putin Creates Market Uncertainty

While the US and Europe have sanctioned Russian oil, Trump’s direct talks with Putin have introduced uncertainty:

• A US-led ceasefire deal could lead to the gradual easing of oil sanctions on Russia.
• However, analysts suggest a ceasefire won’t immediately lead to relaxed restrictions, as multiple parties must agree.
• Westpac’s Robert Rennie cautioned that sanctions relief could take time, delaying any potential supply shifts.

Trump’s Tariffs Set to Disrupt Global Oil Markets

The oil market is also bracing for the potential fallout from new US trade tariffs, set to take effect on Tuesday.

• Levies on China, Mexico, and Canada could trigger retaliatory measures, affecting global trade and demand for crude oil.
• Tariffs on Canadian and Mexican oil would impact 80% of US crude imports, raising costs for refiners already operating at historically high processing levels.
• Chevron’s license to produce Venezuelan oil could also be revoked, further disrupting supply chains.

Hedge Funds Reduce WTI Positions Amid Market Jitters

Investors remain cautious as hedge funds have reduced their net-long WTI positions to the lowest level since 2010, indicating:

• Weak sentiment in the oil market, reflecting uncertainty over US economic policies.
• A downtrend in oil futures since mid-January, fueled by concerns over tariffs and potential supply disruptions.

China’s Economic Plans in Focus

As China heads into its largest political event of the year, the oil market will be watching for:

• Beijing’s new spending plans that could boost economic growth and oil demand.
• Any indications of policy shifts that could counteract the impact of US trade tariffs.

Oil Prices Face Volatile Weeks Ahead

With geopolitical tensions, trade policy shifts, and supply disruptions looming, oil markets remain at a crossroads.

• Traders are looking for clarity on US-Russia relations and tariff rollouts.
• The reaction from Canada, Mexico, and China will be key in determining oil price movements.

As markets brace for potential disruptions, investors must stay prepared for short-term price fluctuations in the oil sector.