OIL prices climbed about 2 per cent to a five-week high on Monday on worries supplies could decline if US President Donald Trump follows through on threats to impose more tariffs on Russia and to possibly attack Iran.
Brent futures were up US$1.11, or 1.5 per cent, to settle at US$74.74 a barrel, while US West Texas Intermediate crude rose US$2.12, or 3.1 per cent, to settle at US$71.48.
That was the highest close for Brent since Feb 24 and the highest close for WTI since Feb 20.
Brent’s premium over WTI fell to US$3.02 a barrel, its lowest since July 2024.
Analysts have said when Brent’s premium over WTI falls below US$4 a barrel, it does not make much economic sense for energy firms to send ships across the ocean to pick up US crude, which should result in lower US exports.
Trump said on Sunday he was “pissed off” at Russian President Vladimir Putin and will impose 25 to 50 per cent secondary tariffs on buyers of Russian oil if he feels Moscow is hindering Trump’s efforts to end the war in Ukraine.
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“(Trump’s) threat on secondary tariffs on Russia and Iranian oil is a factor oil market participants are tracking, although he has indicated he is not planning to introduce them for now,” said UBS analyst Giovanni Staunovo. “But, there is a rising risk of larger supply risks down the road.”
The Kremlin said on Monday that Russia and the US were working on ideas for a possible peace settlement in Ukraine.
China and India are major buyers of Russian crude and their acquiescence would be crucial to making any secondary sanctions package seriously hurt exports from the world’s second-largest oil exporter.
Trump also threatened Iran on Sunday with bombing and secondary tariffs if Tehran did not come to an agreement with Washington over its nuclear programme.
Iran’s Supreme Leader Ayatollah Ali Khamenei said on Monday the US would receive a strong blow if it acts on Trump’s threat. Iran’s Revolutionary Guards, meanwhile, seized two foreign tankers in the Persian Gulf carrying over 3 million litres of allegedly smuggled diesel fuel.
Some analysts believe that Trump may not act on his threats, a view that is putting a cap on oil prices.
IG analyst Tony Sycamore said the market felt Trump would not follow through. If enacted, he said, the tariffs would be another step toward a trade war that would weigh on global growth and demand for crude oil.
On Monday, several Chinese traders were unfazed by the latest threat. Three who spoke with Reuters all said Trump’s constant brinkmanship meant they discounted what he said.
Elsewhere, talks to restart Kurdish oil exports through the Iraq-Turkey pipeline have hit a snag as a lack of clarity over payments and contracts persists, two sources with direct knowledge of the matter told Reuters.
In another move that could limit world oil supplies, US authorities notified Spanish oil company Repsol that its license to export oil from Venezuela is to be revoked. Repsol said it is talking with US authorities on ways the company can keep operating in Venezuela.
In the US, crude oil production fell by 305,000 barrels per day to 13.15 million bpd in January, the lowest since February 2024.
Signs of rising demand
In China, the world’s second-biggest economy, manufacturing activity expanded at the fastest pace in a year in March, a factory survey showed on Monday, with new orders boosting production, giving the economy some reprieve as it deals with an intensifying US trade war.
In Germany, Europe’s biggest economy, inflation fell more than expected in March, bolstering the case for policymakers seeking further interest rate cuts from the European Central Bank.
Lower interest rates reduce consumer borrowing costs, which can spur economic growth and demand for oil. REUTERS
