(Bloomberg) — Oil was little changed as investors speculated on the likelihood of tariffs from the Trump administration.
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West Texas Intermediate held steady below $73 a barrel after earlier rising as much as 1.3% as the dollar weakened. Howard Lutnick, Trump’s pick for commerce secretary, said Wednesday that major US trade partners Canada and Mexico could avoid tariffs if they take action on illegal migration and fentanyl. Previously, officials had indicated that the penalties could kick in this weekend.
In the US, data showed the economy ended last year with softer-than-expected growth, supporting projections that the Federal Reserve will cut rates in March. Equities gained and the dollar sank, making commodities priced in the currency more attractive. The greenback has since pared much of the losses.
Canada exported an average of 4.1 million barrels a day this month to its southern neighbor. The price of Canadian crude has been volatile, with its discount to US oil widening to a six-month low on the tariff threat before recovering after Lutnick’s comments Wednesday. Mexico is the second-largest supplier.
Oil has had a bumpy start to the year, initially pushing higher as cold weather aided demand and the outgoing Biden administration rolled out a fresh package of sanctions against Russian flows. The early gains have since faded, with Trump pressuring OPEC to lower prices.
Aside from the tariff threat, traders have also been piling into Middle Eastern oil markets as sanctions on Russia spark a rush to purchase barrels from the region. Open interest on the Brent-Dubai spread traded on ICE hit a record this week, underscoring the scale of the activity.
Oil output at Iraq’s giant Rumaila field is still constrained to 900,000 barrels a day following a fire at a tank last week, according to Mohammed Al-Najjar, Iraq’s national representative to OPEC. At the same time, crude flows through Russia’s Baltic Sea port of Ust-Luga, which handled about 650,000 barrels of crude a day last year, appeared to pause after a Ukrainian drone strike.
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