US Court Ruling on Trump’s Tariffs
On Thursday, oil prices fell over 1% as investors weighed the potential impacts of a US court ruling that blocked President Donald Trump’s more radical tariffs. The US court had previously ruled on Wednesday that Trump had overstepped his authority in imposing broad tariffs on imports.
- Futures for Brent crude dropped 75 cents, or 1.16%, to $64.15 a barrel.
- West Texas Intermediate (WTI) crude futures fell 90 cents, or 1.46%, to $60.94 a barrel.
Despite initial gains following the court ruling, prices continuously declined throughout the session as high-ranking Trump administration officials downplayed the ruling’s impact, insisting on alternative legal avenues.
OPEC+ Production Decision
Meanwhile, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) may agree on Saturday to accelerate crude production increases for July. Analysts from ING expect another significant supply boost of 411,000 barrels per day, with similar increases anticipated until the end of the third quarter. However, concerns remain about potential new sanctions on Russian crude.
Market Reaction and Other Influencing Factors
Jim Ritterbusch, of Ritterbusch and Associates, noted that the market’s initial reaction to Trump’s reciprocal tariffs had significantly diminished as the session progressed. He suggested that uncertainty surrounding Trump’s tariffs since their inception would likely persist as they navigate the judicial system and sectoral tariffs, such as those on automobiles and auto parts, remain in place.
Fatih Birol, the IEA’s executive director, mentioned in an interview with Bloomberg that oil demand was considerably weak in China and that events in Russia and Iran presented “question marks” for oil prices.
Ongoing negotiations between the US and Iran, aiming to curb Iran’s accelerated nuclear activities since Trump withdrew from the 2015 agreement, add to market volatility. Phil Flynn, senior analyst at Price Futures Group, stated that there is much back-and-forth concern regarding Iran’s situation, with uncertainty about whether a conflict or peace agreement is imminent.
Additional Market Pressures
Further pressuring oil futures, Chevron has ceased its oil production and other activities in Venezuela following the revocation of its crucial license by the Trump administration in March. Venezuela canceled planned shipments for Chevron in April, citing payment uncertainty due to US sanctions.
Mukesh Sahdev, Rystad Energy’s global head of commodity markets, anticipates demand to exceed supply from May through August, with growth outpacing supply by 600,000 to 700,000 barrels per day.
Key Questions and Answers
- Q: What caused the drop in oil prices on Thursday? A: Oil prices fell over 1% amidst a US court ruling that blocked President Trump’s more radical tariffs and concerns about potential new sanctions on Russian crude.
- Q: How did the US court rule on Trump’s tariffs? A: The court ruled that Trump had overstepped his authority in imposing broad tariffs on imports.
- Q: What is the outlook for OPEC+ production? A: Analysts expect OPEC+ to agree on accelerating crude production increases for July, with a potential significant supply boost of 411,000 barrels per day.
- Q: What factors are influencing oil prices apart from the court ruling and OPEC+ decision? A: Factors include market reaction to Trump’s tariffs, uncertainty surrounding Iran negotiations, and additional pressures from Chevron ceasing operations in Venezuela.
