Oil Drops as Tariffs and OPEC+ Supply Shake Markets

by Bloomberg | Mia Gindis and Alex Longley
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

Brent oil extended declines to the lowest closing price since November as US President Donald Trump’s tariffs kick off a series of trade wars and OPEC+ moves to revive production that has been halted for years.

Trump delivered on his threat to hit Canada and Mexico with sweeping import levies and doubled an existing charge on China, sparking swift reprisals that threaten to reduce global economic growth and curtail energy demand. The moves come a day after OPEC+ said it would increase output after repeated delays, a decision that surprised a market already weighed down by expectations for a surplus later this year.

Global benchmark Brent crude slipped to around $71 a barrel and earlier briefly dipped below $70 for the first time since October. Meanwhile, West Texas Intermediate notched only a marginal decline to around $68 a barrel as the potential loss of Canadian or Mexican supplies tightens the US market.

The turmoil also is accentuating a bearish posture in the market, with oil traders paying the biggest premiums for put options in five months.

“The OPEC+ announcement from yesterday to increase output coupled with the US tariffs on Mexican, Canadian and Chinese imports raise the prospects of an oversupplied market where economic growth and oil demand also suffer,” brokerage PVM wrote in a report.

Technicals are also signaling a shift in longstanding market fundamentals, including a tighter market for US crude relative to Brent. WTI’s front-month spread — the difference in futures prices for immediate delivery and the next month — is trading at the biggest premium to the same gauge of Brent since mid-January, when the US ratcheted up sanctions against Russia.

Meanwhile, algorithmic-driven investors known as commodity trading advisers are holding the largest net-short position in WTI since early October, according to Stephen Roseme, managing member of Bridgeton Research Group.

“Unless there’s a contraction of supply outside of OPEC, prices are going to fall even further,” said Gregory Brew, a geopolitical analyst at the Eurasia Group. The firm sees Brent trading in a range with a lower end of $60 for the year, he added.

Roughly 38% of more than 100 traders and analysts polled at a Bloomberg event in London on Feb. 26 saw a chance of oil hitting $50 this year.

Oil Prices:

• Brent for May delivery fell 0.8% to settle at $71.04 a barrel.
• WTI for April delivery dropped 0.2% to settle at $68.26 a barrel.

by Bloomberg | Mia Gindis and Alex Longley
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas