Oil prices softened on Monday despite U.S. President Donald Trump’s warning of secondary tariffs on buyers of Russian crude. While geopolitical risks typically push prices higher, the market remains cautious amid upcoming OPEC+ production increases, global demand fluctuations, and uncertainty surrounding the feasibility of Trump’s proposed measures.
Oil Prices Dip as Market Awaits Further Clarity
Global crude oil benchmarks recorded slight declines in early trading, reflecting a cautious investor approach. As of 0028 GMT on Monday, Brent crude futures for June delivery fell by 17 cents (0.2%) to $72.59 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 18 cents (0.3%) to $69.18 per barrel. The front-month Brent contract, which is set to expire later in the day, managed a modest gain of 8 cents (0.1%) to $73.71 per barrel.
The minor fluctuations follow a third consecutive weekly gain for both crude oil benchmarks. However, they remain on track for their first quarterly loss in two quarters, signaling persistent concerns over global economic stability and supply chain disruptions.
Highlighting Points:
Brent crude (June): Down 0.2% at $72.59 per barrel
WTI crude: Down 0.3% at $69.18 per barrel
Front-month Brent: Up 0.1% at $73.71 per barrel
First quarterly drop in two quarters, despite recent weekly gains
Trump’s Tariff Threats Add to Market Volatility
Over the weekend, President Donald Trump escalated his rhetoric against Russia, expressing frustration over Moscow’s perceived obstruction of ceasefire efforts in Ukraine. Trump stated that if Russia does not cooperate in peace negotiations, he may impose secondary tariffs ranging from 25% to 50% on countries that purchase Russian crude oil.
The remarks sent shockwaves through the energy sector, as secondary sanctions could have widespread implications for global oil trade. Countries such as China, India, and Turkey—major buyers of Russian crude—would be directly impacted by such tariffs, potentially altering their energy procurement strategies and creating ripple effects throughout the market.
Trump’s Highlight Statements:
Criticized Russia for blocking U.S. peace efforts in Ukraine
Threatened secondary tariffs of 25% to 50% on nations importing Russian crude
Said new sanctions could be implemented within a month
While traders initially expected a bullish reaction in oil prices, skepticism about Trump’s ability to enforce such measures effectively led to a muted market response. Investors are also factoring in the potential for retaliatory actions from affected nations, which could further disrupt trade flows and economic stability.
OPEC+ Production Plans Offset Supply Concerns
A significant factor mitigating the potential price surge from Trump’s tariff threats is the OPEC+ strategy to gradually increase oil production. The coalition, which includes OPEC members and key allies like Russia, had previously implemented output cuts to stabilize prices, but it is now set to boost supply starting in April.
Production increases will begin in April and are expected to extend into May.
Saudi Arabia, the world’s largest crude oil exporter, may lower its official selling price (OSP) for Asian buyers in May, reflecting a three-month low due to weakening benchmark prices.
Traders are closely watching OPEC+ policies to gauge how additional supply will impact the balance between demand and pricing.
Market Insight:
Yuki Takashima, an economist at Nomura Securities, emphasized that while Trump’s statements have created uncertainty, supply-side factors remain dominant in driving market sentiment.
“Trump’s comments were expected to push oil prices higher, but doubts about their implementation, combined with rising OPEC+ production, are keeping investors cautious,” said Takashima.
Market analysts project that WTI crude will trade between $65 and $75 per barrel, as traders assess the combined impact of tariff threats, supply expansions, and broader economic conditions.
Kurdish Oil Exports Face Prolonged Disruptions
Adding to the complexity of global supply dynamics, ongoing negotiations over Kurdish oil exports via the Iraq-Turkey pipeline remain deadlocked. The pipeline, which previously transported around 450,000 barrels per day to Turkey’s Ceyhan port, has been shut down for nearly two years due to political and contractual disputes.
According to two industry sources familiar with the matter, talks between Baghdad and Ankara have stalled over payment mechanisms and contract structures. Despite previous optimism for a resolution, the lack of clear financial agreements continues to delay progress.
The prolonged halt in Kurdish crude exports has created supply constraints, particularly for regional refiners reliant on Iraqi crude. However, given the wider availability of alternative supply sources, the market has largely absorbed the disruption, preventing a significant upward price movement.
Developments:
Kurdish oil exports remain halted due to unresolved disputes.
Negotiations between Iraq and Turkey continue, but progress is slow.
Market impact remains limited as alternative supplies offset the disruption.
Trump Expands Pressure to Iran with Additional Threats
Beyond Russia, Trump also targeted Iran in his latest round of economic threats. He warned that if Tehran does not engage in new nuclear negotiations, the U.S. could respond with a combination of military strikes and additional secondary sanctions.
This rhetoric follows a history of strained U.S.-Iran relations, particularly regarding sanctions on Iranian oil exports. While Iran has faced existing U.S. restrictions on crude sales, Trump’s latest threats signal a potential escalation of tensions, which could lead to further volatility in the oil market.
Potential Implications:
Iran may retaliate by disrupting regional crude shipments.
Sanctions on Iranian oil could tighten supply if strictly enforced.
Tensions could increase geopolitical risks in the Middle East.
Oil Market Caught Between Policy Shifts and Supply Adjustments
With Trump’s proposed secondary tariffs on Russian crude buyers, OPEC+ production increases, and ongoing geopolitical tensions in key oil-producing regions, the crude market remains highly volatile. Traders and analysts will continue to monitor:
Trump’s follow-through on tariff threats and potential enforcement challenges.
The effectiveness of OPEC+ production adjustments in stabilizing supply and demand.
Developments in Kurdish oil exports and broader Middle Eastern supply risks.
