CRUDE prices fell on Tuesday as U.S. tariffs on China took effect and Beijing retaliated with its own tariffs, heightening trade war fears, while U.S. President Trump delayed a decision on imposing steep levies on Canada and Mexico for a month.
U.S. West Texas Intermediate (WTI) crude was down $1.21, or 1.65%, at $71.95 per barrel at 1044 GMT, while Brent futures were down 73 cents, or 1%, to $75.23.
China’s Finance Ministry said it would impose levies of 15% on U.S. coal and LNG, and 10% on crude oil, farm equipment and the small number of trucks as well as big-engine sedans shipped to China from the United States.
Separately, China’s Commerce Ministry and its Customs Administration said they were imposing export controls on some metals that are critical for electronics, military equipment and solar panels.
Ongoing trade tensions between the U.S. and China may dampen demand for oil, leading to continued pressure on prices.
“The tit-for-tat measures out from China may not stop at just the 10% tariffs on crude oil from the U.S. which can also see a deliberate attempt to weaken the yuan if the U.S. fires back with more tariffs on China exports to the U.S.,“ said Kelvin Wong, senior market analyst at OANDA
“Overall such actions are likely to give rise to a stronger U.S. dollar that in turn weakens ... oil prices given that OPEC+ members are still on track to increase oil supply gradually from April.”
China’s 2024 crude oil imports from the United States made up 1.7% of its total imports of crude, customs data show.
China’s counter-tariffs on the U.S. may be perceived as a sign of escalation and may reduce the likelihood of a temporary resolution akin to U.S. agreements with Mexico and Canada, IG market strategist Yeap Jun Rong said in an email.
Earlier, Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum said they had agreed to bolster border enforcement efforts in response to Trump’s demand to crack down on immigration and drug smuggling.
That would pause for 30 days U.S. tariffs of 25% on the two countries, with a 10% tariff on energy imports from Canada, that had been set to take effect on Tuesday.
“The suspension of tariffs on Canada and Mexico for a month gives the market some breathing room to refocus on other drivers, such as the strength of the dollar or the mutual imposition of tariffs between China and the U.S., which rekindles concerns over the global economy, this as OPEC+ remains on hold on its supply policy,“ said Harry Tchilinguirian, head of research at Onyx Capital Group.
The OPEC+ group of oil producers agreed on Monday to stick to its policy of gradually raising oil output from April.
On the demand side, investors will be looking out for U.S. oil stockpile data for the week to Jan. 31. Analysts polled by Reuters expect that crude inventories rose, while gasoline and distillate inventories probably fell.
