US oil prices dropped after comments from Commerce Secretary Howard Lutnick, suggesting the Trump administration could reconsider some tariffs on Mexico and Canada, creating added uncertainty in global markets. West Texas Intermediate (WTI) fell below $68 a barrel after a 3% decline over the last three sessions, while Brent crude held losses near $71. Although Lutnick did not specify any concrete actions President Donald Trump was contemplating, he downplayed the possibility of a complete rollback of the levies in an interview with Fox News.
Crude oil prices have been on a downward trajectory since mid-January, fueled by concerns over the impact of Trump’s trade policies, which have raised fears of a potential global trade war that could negatively affect energy demand. Oil options traders are showing the most bearish sentiment in five months, primarily due to worries about the ramifications of US tariffs and the OPEC+ group’s plans to resume previously halted production.
“Canada is bunkering down for a fight,” said Wayne Gordon, regional chief investment officer at UBS Group AG in Singapore. He warned, “The real risk is this situation could drag on,” referring to the escalating tensions surrounding tariffs.
The potential impact of Trump’s tariffs could significantly alter global oil trade flows. Mexican oil might be redirected to markets in Asia, while tariff-free Latin American crude could find its way to the US in higher quantities. Additionally, fuel buyers on the US East Coast may have to turn to European suppliers to meet demand.
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