On February 4th, crude prices declined due to U.S. tariffs on China and Beijing's retaliatory measures, raising fears of a trade war. Additionally, President Trump postponed a decision on imposing tariffs on Canada and Mexico for a month.
At 1302 GMT, U.S. West Texas Intermediate (WTI) crude dropped by $1.63 to $71.53 per barrel, while Brent futures decreased by $1.05 to $74.91.
China's Finance Ministry announced tariffs of 15% on U.S. coal and LNG, and 10% on crude oil, farm equipment, trucks, and large-engine sedans exported from the United States to China. Furthermore, export controls were imposed on critical metals by China's Commerce Ministry and Customs Administration.
The ongoing trade tensions between the U.S. and China may reduce oil demand, thereby continuing to put pressure on prices. According to Kelvin Wong, a senior market analyst at OANDA, China's retaliatory actions may lead to a stronger U.S. dollar and potentially weaken oil prices.
China's retaliatory tariffs could hinder the likelihood of a temporary resolution similar to those with Mexico and Canada, as stated by IG market strategist Yeap Jun Rong.
President Trump's demand for stricter border enforcement led Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum to agree to enhanced measures. Consequently, U.S. tariffs on these nations have been postponed for 30 days.
This delay gives the market time to refocus on other factors such as the dollar's strength and the tariff exchange between China and the U.S., raising worries about the global economy. OPEC+ remains undecided on its supply policy, noted Harry Tchilinguirian, head of research at Onyx Capital Group.
OPEC+ agreed on Monday to gradually increase oil output in April. Analysts are monitoring U.S. oil stockpile data for the week ending January 31, with expectations of an increase in crude inventories and a decrease in gasoline and distillate inventories.