WTI posts weekly gain on tariffs and aggressive Iran policy
WTI prompt prices fell 0.8% on Friday, settling at $70.74/Bbl. Despite the drop, oil prices still added roughly 1% on the week and ended its three consecutive week slide.
President Trump and Russian President Vladimir Putin agreed to initiate peace talks to end the war in Ukraine. The announcement sent WTI below $72 a barrel, a more than 2% drop. A proposed peace plan could potentially include sanctions relief on Russian energy. The U.S imposed strict measures on 183 Russian ships on January 10, and 94 of those targeted now remain idle since the restrictions went into place. WTI prices surged following the sanctions imposed on January 10, briefly reaching $80/Bbl by mid-January. The peace talks serve as a bearish signal as disruptions to Russian oils flows could end.
Concerns over potential trade wars continue as Trump introduces reciprocal tariffs. These tariffs will be levied on countries deemed unfairly charging the U.S., and no details were specified on which industries would be the focus. Trump’s non-diplomatic approach injects volatility into the prospects of global demand growth. There is a tentative plan to introduce the reciprocal tariffs by April 1.
Friday morning, oil markets reacted negatively after US Treasury Secretary Scott Bessent reiterated Washington’s commitment to reducing Iran’s oil exports. The “maximum pressure” campaign hopes to cut Iran’s oil exports to 100 MBbl/d. Despite some anxiety over disruptions to Iran’s 3.3 MMBbl/d crude production, the market still looks for proof of potential disruptions as the Islamic Republic has become quite adept at skirting US sanctions by virtue of their “dark fleet.”
AEGIS holds a neutral view on prices as oil prices hover near $70/Bbl. Given the fundamentals and wildcard like Trump’s policy, we see equal downside versus upside for oil.