Crude holds near flat as traders weigh impact of new US tariffs

SINGAPORE: Oil prices held mostly steady on Friday after a dip the day before, as traders tried to assess the fallout from new US tariffs that could slow global economic growth and dampen fuel demand.

By midday, Brent crude inched up 4 cents to $71.74 a barrel, while US West Texas Intermediate (WTI) crude rose just 1 cent to $69.27.

Despite the quiet trading session, both benchmarks are on track for solid weekly gains. Brent is expected to rise nearly 5 per cent, while WTI may finish the week up over 6 per cent. The gains follow earlier comments by US President Donald Trump, who warned of possible penalties on countries like China and India for continuing to import Russian oil. The move is seen as an attempt to pressure Moscow to end its war in Ukraine.

But on Friday, the market’s focus shifted to a fresh wave of tariffs Trump announced, which are set to take effect from August 1. The new duties, ranging from 10 to 41 per cent, target imports from several key trading partners including Canada, India, and Taiwan,  nations that, according to Trump, missed his deadline for reaching new trade agreements.

Economists and energy analysts say these tariffs could increase the cost of goods, slow down economic growth, and reduce demand for fuel, especially in the US, the world’s largest economy and biggest oil consumer.

There are already signs that tariffs are driving up prices. US inflation picked up in June, with noticeable jumps in the cost of imported items like furniture and recreational products. This has led some analysts to believe the Federal Reserve might delay any interest rate cuts until at least October.

Higher interest rates typically slow down borrowing and spending, which can also put a brake on oil demand.

Still, Trump’s threats of secondary sanctions on buyers of Russian oil have lent support to oil prices. JP Morgan analysts estimate that about 2.75 million barrels per day of Russian seaborne exports could be at risk if such measures are enforced. With China and India being the second- and third-largest oil consumers globally, any disruption in their supply lines could tighten the global oil market.

However, analysts caution that targeting Russia, the world’s second-biggest oil exporter, with sweeping sanctions might be difficult without triggering a sharp rise in global oil prices.