Crude oil price climbed in early trading on Wednesday following the news of an Israeli attack against Hamas leaders in Doha, Qatar, along with reports that President Donald Trump had asked the European Union to slap a 100% tariff on China and India to make them stop buying Russian crude.
At the time of writing, Brent crude was trading at $67.09 per barrel, with West Texas Intermediate at $63.32 per barrel, both up from Tuesday’s close but modestly, by less than 1%.
Earlier this week, the Financial Times reported that EU officials were discussing further sanction pressure on Russia, after 18 packages of sanctions failed to do anything about Moscow’s resolve to see its goals in what it calls a special military operation in Ukraine through.
Now, President Trump has suggested that the EU use tariffs instead of sanctions, targeting the biggest buyers of Russian crude – China and India. It would be a tricky move, however, with China being the second-largest trade partner of the EU after the United States, as noted by the FT. Even trickier is the effect such a move would have on international oil prices if the EU decides to go ahead with the tariff idea.
Tariffs could be tricky for the U.S. itself because, if successful, they would inevitably push oil prices higher. “The expansion of secondary tariffs to other major buyers such as China could disrupt Russian crude exports and tighten global supply, a bullish signal for oil prices,” Reuters quoted LSEG analysts as saying.
“However, uncertainty remains over how far the administration will go, as aggressive action could conflict with efforts to manage inflation and influence the Federal Reserve to reduce interest rates.”
Meanwhile, reports emerged, citing official Israeli sources, that the IDF had attacked a target in Doha, Qatar, aiming to take out Hamas leaders gathered in the city for the latest ceasefire negotiations. Qatar’s prime minister said the attack could derail the peace effort.
Yet the impact on oil price was rather modest, reinforcing the perception of weak demand prospects. This is hardly a surprise given the amount of forecasting along these lines that has been steadily flowing into the news stream.
By Irina Slav for Oilprice.com