Oil prices inched higher on Tuesday after threats by U.S. President Donald Trump to impose secondary tariffs on Russian crude and attack Iran, though worries about the impact of a trade war on global growth capped gains.
Brent futures rose 16 cents, or 0.2%, to $74.93 a barrel at 0330 GMT, while U.S. West Texas Intermediate crude futures climbed 13 cents, or 0.2%, to $71.61.
The contracts settled at five-week highs a day earlier.
“Near-term risks are skewed to the upside, with U.S. threats of secondary tariffs on Russian and Iranian oil leading market participants to price for the risks of tighter oil supplies,” said Yeap Jun Rong, market strategist at IG.
However, broader themes still revolve around concerns of upcoming tariffs weighing on global demand, along with prospects of increased supply from OPEC+ and the U.S., said Yeap.
A Reuters poll of 49 economists and analysts in March projected that oil prices would remain under pressure this year from U.S. tariffs and economic slowdowns in India and China, while OPEC+ increases supply.
Slower global growth would dent fuel demand, which might offset any reduction in supply due to Trump’s threats.
After news of Trump’s threats initially boosted prices on Monday, traders told Reuters they viewed the president’s warnings to Russia, at least, as a bluff.
Trump, on Sunday, told NBC News that he was very angry with Russian President Vladimir Putin and would impose secondary tariffs of 25% to 50% on Russian oil buyers Moscow tries to block efforts to end the war in Ukraine.
Tariffs on buyers of oil from Russia, the world’s second largest oil exporter, would disrupt global supply and hurt Moscow’s biggest customers, China and India.
Trump also threatened Iran with similar tariffs and bombings if Tehran did not reach an agreement with the White House over its nuclear program.
“For now, it appears to be just a threat to Russia and Iran. However, if it becomes a reality, it creates plenty of upside risk to the market given the significant oil export volumes from both countries,” said ING commodities strategists on Tuesday.
The market will be watching for weekly inventory data from U.S. industry group the American Petroleum Institute later on Tuesday, ahead of official statistics from the Energy Information Administration on Wednesday.
Five analysts surveyed by Reuters estimated on average that U.S. crude inventories fell by about 2.1 million barrels in the week to March 28.
Meanwhile, a weaker dollar on Tuesday also kept the market buoyed. A softer dollar supports demand for oil as it makes crude less expensive for those holding other currencies.
(Reporting by Jeslyn Lerh in Singapore; Additional reporting by Laila Kearney in New York; Editing by Sonali Paul and Kim Coghill)