(Business Line)
Crude oil futures traded flat on Wednesday morning as the market awaited the implementation of US reciprocal tariffs.
At 9.55 am on Wednesday, June Brent oil futures were at $74.50, up by 0.01 per cent, and May crude oil futures on WTI (West Texas Intermediate) were at $71.25, up by 0.07 per cent. April crude oil futures were trading at ₹6117 on Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday against the previous close of ₹6118, down by 0.02 per cent, and May futures were trading at ₹6095 against the previous close of ₹6098, down by 0.05 per cent.
Though the US has confirmed that Donald Trump, US President, will impose reciprocal tariffs on Wednesday, it has not given any details on the scope and size of the trade barriers. This has put the market players on tenterhooks as they fear the tariffs will lead to a trade war.
A White House spokesperson said that reciprocal tariffs would come into effect immediately after Trump announces them on Wednesday, the 25 per cent tariff on auto imports will come into effect on April 3.
Market players feel that these tariffs could impact the economies of several countries. This, in turn, may impact the demand for commodities such as crude oil.
Meanwhile, the recent Trump threats to impose secondary duties on Russian oil and increased sanctions on Iran provided some support to the crude oil.
In their Commodities Feed for Tuesday, Warren Patterson, Head of Commodities Strategy of ING Think, and Ewa Manthey, Commodities Strategist, said it appears to be just a threat to Russia and Iran for now. If it becomes a reality, it creates plenty of upside risk to the market given the significant oil export volumes from both countries.
Russia exports around 7.4 million barrels a day of crude oil and refined products, while Iran exports around 1.4 million barrels a day of crude oil, they said. This tool could be very effective in persuading buyers to shun the targeted oil, with the impact on the buying country’s economy potentially far outweighing the benefits of buying discounted crude oil.
“The key buyers of Russian crude oil are China and India, whose top export markets are the US. However, taking such action, particularly against Russia, would make it harder for Trump to lower oil prices, as promised. Instead, it would push prices much higher,” they said.
The latest data by American Petroleum Institute (API) showed an increase in crude oil inventories in the US for the week ending March 28. It showed crude oil inventories increased by 6 million barrels, and gasoline inventories declined by 1.6 million barrels for the week ending March 28. Official data from the US EIA (Energy Information Administration) is expected later on Wednesday.
April natural gas futures were trading at ₹339.10 on MCX during the initial hour of trading on Wednesday against the previous close of ₹340.80, down by 0.50 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), May turmeric (farmer polished) contracts were trading at ₹14750 in the initial hour of trading on Wednesday against the previous close of ₹14184, up by 3.99 per cent.
April Guar gum futures were trading at ₹10250 on NCDEX in the initial hour of trading on Wednesday against the previous close of ₹10327, down by 0.75 per cent.
