Crude oil declined by more than 2 per cent on Thursday, as investors weighed the potential impact of US President Donald Trump’s tariffs on global economic growth.
Brent crude was down by 2.21 per cent or $1.55 to $68.64 per barrel and the US West Texas Intermediate (WTI) crude finished at $66.57 a barrel after losing 2.65 per cent or $1.81.
President Trump has returned to dangling tariffs, threatening Brazil, Latin America’s largest economy, with a punitive 50 per cent tariff on exports to the US.
He is pressuring his Brazilian counterpart Luiz Inacio Lula da Silva over Brazil’s trial of former President Jair Bolsonaro over charges of plotting a coup to stop him from taking office in 2023. The Brazilian government has since hinted at reciprocal measures.
Oil is Brazil’s top export to the US, and until now it had been exempt from a 10% tariff already imposed on other Brazilian goods.
He has also announced plans for tariffs on copper, semiconductors and pharmaceuticals. His administration sent tariff letters to the Philippines, Iraq and others, adding to over a dozen letters this week including to top suppliers like South Korea and Japan.
However, market analysts noted that recent pauses and walking back on threats has caused the market to become less reactive to such announcements.
Regardless, worries about inflation and the next step for interest rates continued to grip the market. Higher interest rates make borrowing more expensive and can slow demand for oil.
The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) are set to approve another big output boost for September, as they complete unwinding voluntary production cuts by eight members. Also, the United Arab Emirates’ will move to a larger quota.
It has since hiked output for May till August, but there are indicators it will pause for October after September due to peak demand. The market expects a bigger number around the 548,000 barrels per day for August.
The US remained worried and frustrated around a lack of progress in ending the war in Ukraine. President Trump said recently he was considering a bill that would impose tougher sanctions on Russia.
Also, the European Commission has proposed a major overhaul to its Russian oil price cap regime, introducing a floating benchmark tied to global crude prices in an effort to regain control over a sanctions tool that has lost impact as oil markets decline.