Oil prices stabilize after tariff delay and trade optimism

[WORLD] On February 14, 2025, oil prices saw a mixed day of trading, with prices ultimately ending flat after paring earlier losses. This shift in market sentiment was largely driven by the news that U.S. tariffs would be delayed until at least April, offering some relief to the energy sector. Investors had initially reacted to concerns that rising tariffs could lead to a global economic slowdown, which would, in turn, dampen demand for energy. However, optimism returned as the tariff implementation was postponed.

Brent crude futures, a global oil benchmark, closed at $75.02 per barrel, down by only 16 cents or 0.21%. Meanwhile, U.S. West Texas Intermediate (WTI) crude finished at $71.29 a barrel, experiencing a smaller drop of 8 cents, or 0.11%. The initial declines in oil prices were more significant, with both Brent and WTI falling by over 2% earlier in the trading session.

Impact of U.S. Tariff Delay

The oil market’s recovery was largely attributed to the news that U.S. President Donald Trump had ordered U.S. commerce and economics officials to study reciprocal tariffs against countries imposing tariffs on U.S. goods. Importantly, their recommendations are not expected until at least April 1, 2025, giving market participants more time to negotiate and resolve potential trade tensions.

Phil Flynn, senior analyst at Price Futures Group, noted, "We saw a big recovery in prices on tariffs not going into effect until April. That will allow time for negotiation." This delay is seen as an opportunity for further diplomatic talks, which could ultimately ease trade tensions that were threatening to destabilize both global economies and energy demand.

Ukraine Conflict and Its Impact on Oil Prices

The day’s trading also saw significant volatility due to developments related to the ongoing Russia-Ukraine conflict. On Wednesday, oil prices had fallen more than 2% after news emerged that both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy had expressed interest in a potential peace agreement. This news raised concerns among traders that a peace deal could lead to the lifting of sanctions on Russian oil exports, which would flood the market with additional supply and reduce the pressure on oil prices.

Giovanni Staunovo, an analyst with UBS, commented on the shift in market sentiment, explaining that “the oil price decline over the past 24 hours looks to be driven by a change from worries about tight supplies to concern about sufficient supply.” This potential increase in Russian energy exports led to fears that prices could fall further if the sanctions were eased, which in turn would reduce the market’s tightness.

U.S. Oil Inventories and Inflation Data

Oil prices were also impacted by news from the U.S., the world’s largest consumer of crude oil. According to the latest data from the Energy Information Administration (EIA), U.S. crude inventories rose more than expected last week. This build in stocks weighed on oil prices, signaling that the supply side of the market may not be as constrained as initially believed.

Moreover, U.S. inflation data, which showed higher-than-expected numbers, added to the market’s uncertainty. This inflationary pressure could influence the Federal Reserve’s decision-making process, particularly in terms of interest rate adjustments. Some analysts, such as John Evans from PVM, indicated that these inflation numbers could lead the Fed to adopt a more cautious stance on rate cuts in 2025, which could have broader implications for economic growth and energy demand.

Russian Oil Production and the Sanctions Landscape

Despite the current uncertainty surrounding the Russia-Ukraine conflict, some analysts are still hopeful about Russian oil production remaining stable. The International Energy Agency (IEA) reported that Russian crude production saw a slight increase in January 2025, indicating that workarounds to the latest U.S. sanctions might be effective. This is important because Russia is the world’s third-largest oil producer, and any shifts in its production levels directly impact global oil prices.

While sanctions have led to elevated prices over the past several years, particularly in light of Russia’s invasion of Ukraine, there are growing expectations that Russian oil exports could be sustained if new avenues to circumvent sanctions are found. This possibility has contributed to the caution expressed by market participants, who are closely monitoring geopolitical events as they unfold.

Looking Ahead: Trade Talks and Energy Supply Concerns

As the oil market awaits further developments in the trade talks and the Russia-Ukraine situation, the outlook remains highly uncertain. Analysts have pointed to the precarious balance between supply and demand, which has been further complicated by geopolitical factors. A potential de-escalation in the Russia-Ukraine conflict, alongside the delay in tariff implementation, has injected some optimism into the market. However, concerns about adequate supply, particularly if Russian exports rise, continue to linger.

Oil prices closed flat on Thursday, February 14, 2025, as traders reacted to a delay in U.S. tariffs, news of potential peace talks between Russia and Ukraine, and rising U.S. crude inventories. While early losses were significant, the market was buoyed by the possibility of further negotiations, which offered hope that the global economy might avoid the negative impacts of an escalating trade war. As the situation unfolds, market participants will be closely watching geopolitical developments, economic indicators, and oil inventory data to gauge future price movements.