Oil prices were mostly flat after rising earlier in the session on Thursday due to a fall in US inventories.
According to the US Energy Information Administration, crude oil inventories in the country decreased by 3.3 million barrels to 433.6 million barrels in the week ended March 21.
Prices also had support from concerns over tighter global supply after US tariffs threats on Venezuelan oil purchasers and sanctions on Iran’s exports.
“Stronger than expected drop in US crude stocks last week (API report) contributed to the latest acceleration higher, as oil remains supported by growing concerns about potential supply shortage, following a threat from the US of imposing sanctions to those buying oil from Venezuela, with China being top buyer of Venezuelan oil,” Slobodan Drvenica, information and analysis manager at Windsor Brokers, said in a FXstreet report.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $69.58 per barrel, down 0.1%.
The Brent crude oil on the Intercontinental Exchange was at $72.97 a barrel, also down 0.1% from the previous close.
WTI oil price reached a three-week high on Wednesday, marking its sixth consecutive day of gains.
Drvenica said:
The recent new round of US sanctions on Iran’s oil sales, further complicated the situation, as China is also the biggest buyer of crude oil from Iran.
Trump’s tariff threats
The US government has recently escalated its economic pressure on Iran by tightening oil sanctions.
This includes adding a Chinese refinery to the sanctions list for the first time, a move that signifies the US’s intent to further restrict Iran’s oil exports and cut off its revenue streams.
The US aims to compel Iran to comply with its demands regarding its nuclear program and regional activities.
These sanctions are part of a broader US strategy to isolate Iran economically and diplomatically.
However, this move could also strain US-China relations and disrupt global oil markets.
“This could also deter other potential buyers of Iranian oil,” Carsten Fritsch, commodity analyst at Commerzbank AG, said.
Meanwhile, US President Donald Trump had also announced a 25% tariff on buyers of Venezuelan oil earlier this week.
David Morrison, senior market analyst at Trade Nation:
Earlier this week prices got a boost after Mr Trump announced 25% secondary tariffs on any country that buys oil or gas from Venezuela, which was seen as another way of disrupting China’s economy.
Impact of auto tariffs
Market participants were actively evaluating the potential repercussions on oil demand following President Trump’s announcement to impose a 25% tariff on imported cars and light trucks starting next week.
This move has raised concerns about a potential decrease in vehicle imports, which could lead to a decline in overall oil consumption.
The automotive industry is a significant consumer of petroleum products, and any disruptions to its supply chain or sales could have a ripple effect on the energy sector.
“The news around Trump’s tariffs on autos may actually turn out to be a net positive for crude oil because the rise in new car prices from tariffs will mean it slows down the switch to newer, more fuel-efficient models,” Tony Sycamore, a market analyst at IG, was quoted as saying in a Reuters report.
Technical outlook
Front-month WTI contract has been held above the $69 per barrel mark, while Brent crude has been hovering below $73.
“Prices have been steadily pushing up since WTI retested support around $65 just over a fortnight ago,” Morrison said.
“This slow and measured rally is helping to steady nerves and bring buyers back into the market.”
The daily moving average divergence and convergence have risen from moderately oversold levels and are approaching neutral territory.
Morrison added:
This would suggest that there’s still plenty of room to the upside. But buyers should remain cautious at current levels, and keep an eye on how oil behaves if it manages to break back above $70.
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