DTN Oil Update
Crude Oil Futures Fall on Trade War Expectations
HOUSTON (DTN) -- The crude oil market saw a pullback on Tuesday, reversing earlier gains following data from the Institute for Supply Management (ISM), which showed the Manufacturing Purchasing Managers (PMI) Index dropped by 1.3 percentage points to 49% in March, down from 50.3% in February.
The data set a bearish tone in the oil futures market, signaling a slowdown in the U.S. manufacturing activity driven in part by concerns about the economic impact of trade tariffs.
Trade tensions are anticipated to escalate as Wednesday, April 2, marks the deadline for the Trump administration to levy sweeping trade tariffs on all countries trading with the United States.
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So far, the U.S. government has imposed 20% tariffs on imports from China, 25% on steel and aluminum from Canada and Mexico, 25% on imported goods from the European Union, and 25% on foreign car imports.
The uncertainty about the effects of these tariffs on global economic growth and recent U.S. economic data has reignited concerns about a potential recession in the United States, which continues to face inflationary pressures.
The Manufacturing PMI Index contracted in March after two consecutive months of expansion and preceded by a 26-month contraction, according to ISM data released Tuesday morning.
"Demand and production retreated and de-staffing continued, as panelists' companies responded to demand confusion. Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth," stated the ISM in its monthly report, which is based on surveys of purchasing and supply executives in manufacturing firms.
The market is focused also on geopolitical events, particularly on the potential announcement of additional secondary sanctions on Russian oil trade, after President Trump stated that Russia's President Vladimir Putin has failed to reach a real ceasefire agreement with Ukraine.
Recent sanctions imposed by the United States on Iran and Venezuela oil trade, aiming to reduce their oil exports to zero, were expected to put downward pressure on oil futures prices.
However, these sanctions have not significantly impacted oil futures as OPEC+ countries are expected to increase their oil output by 2.2 million bpd starting Wednesday.
The front-month NYMEX West Texas Intermediate futures contract for May delivery fell by $0.29 to $71.19 bbl, while the May ICE Brent futures contract dropped by $0.33 to $74.44 bbl. In contrast, the May RBOB futures contract rose by $0.0091 to $2.2998, while the front-month ULSD futures contract rose by $0.000931 to $2.2887 gallon.
The U.S. Dollar Index continued its upward trend, increasing by 0.52% to 103.95 against a basket of foreign currencies.
