Oil Retreats On Trump EU Tariff Threat As EIA Warns Of Resulting Demand Erosion

Meanwhile, pundits offer conflicting views on market strength: File Image/Pixabay

Supporting the notion that the previous session's gains were a blip in a bearish downward cycle, crude prices on Thursday retreated as traders resumed worry over U.S. president Donald Trump's multi-country tariffs and how the resulting trade war may affect demand.

As of 1525 GMT, Brent dipped 54 cents to $70.41 per barrel, and West Texas Intermediate fell 63 cents to $67.05 per barrel.

The tariff worries were exacerbated late Wednesday when news broke that Trump threatened to impose further tariffs on European Union goods if the EU followed through with its plan to enact counter-tariffs on some U.S. goods in April.

A counter-tariff threat made by Canada involving energy distribution was rescinded earlier in the week when Trump vowed to double his initial 25 percent tariff against that country's exports to 50 percent.

Further rattling investors on Thursday was the International Energy Agency, which warned that demand is under pressure due to the escalating trade war.

It calculated that global oil supply could exceed demand by around 600,000 barrels per day (bpd) this year, and that U.S.-led supply growth and global demand were now expected to rise by just 1.03 million bpd, 70,000 bpd less than the agency's predictions a month ago.

Compounding the gloom was JP Morgan analysts, who stated that U.S. Transportation Security Administration data showed jet passenger volumes for March "have decreased by 5 percent year-over-year, following stagnant traffic in February."

However, they added that as of March 11, global oil demand averaged 102.2 million bpd, "expanding 1.7 million bpd year-over-year and exceeding our projected increase for the month by 60,000 bpd."

Geopolitical concerns on Thursday saw Russia president Vladimir Putin agree with Trump's plea for a one month ceasefire between his country and Ukraine, but only if long-lasting peace was the objective and if root causes of the conflict (Ukraine's desire to join NATO) were addressed.

As for another concern influencing crude trading – the prospect of the U.S. heading into a recession - Stephen Innes, managing partner at SPI Asset Management, tried to assuage fears by telling media that "scattered calls for a U.S. recession in [the first quarter] are looking overblown.

"There's been little evidence that soft survey data is bleeding into 'hard' data in any meaningful way……what's happening is a controlled reset of government employment and spending to temper inflation to force the [Federal Reserve's] hand, and the latest CPI data suggests it's starting to work - though the data hasn't yet captured the full impact of tariffs."