Oil prices gain on trade war shifts and tightening supply

[WORLD] Oil prices rose in early trade on Tuesday, lifted by President Donald Trump's proposed tariff exemptions and a resurgence in Chinese crude oil imports ahead of tighter Iranian supply. Brent crude futures jumped 27 cents, or 0.42%, to $65.15 per barrel at 0046 GMT, while U.S. West Texas Intermediate crude advanced 26 cents, or 0.42%, to $61.79.

The recent uptick in oil prices also reflects broader market optimism as geopolitical tensions in the Middle East continue to simmer. Analysts note that any escalation in conflicts involving key oil-producing regions, such as Libya or Venezuela, could further tighten global supply and push prices higher. This comes as the U.S. prepares to fully enforce sanctions on Iranian oil exports next month, a move that has already spurred preemptive buying from major importers like China and India.

In the latest development in Trump's erratic trade battle, he said he was considering revising the 25% tariffs slapped on foreign auto and auto parts imports from Mexico, Canada, and other countries. The erratic U.S. trade policies have generated uncertainty in global oil markets, prompting OPEC to decrease its demand forecast for the first time since December.

OPEC’s revised forecast highlights growing concerns over slowing economic growth, particularly in Europe and Asia, where manufacturing activity has shown signs of weakening. The cartel now expects global oil demand to grow by 1.21 million barrels per day (bpd) in 2019, down from its previous estimate of 1.24 million bpd. This adjustment underscores the delicate balance OPEC and its allies face as they weigh production cuts against softening demand.

The Trump administration stated on Friday that it will give tariff exemptions for cellphones, computers, and some other electronic items, the majority of which are imported from China. This caused both oil benchmarks to settle marginally higher on Monday.

On Sunday, Trump stated that he will disclose the duty rate on imported chips within the next week, and a Monday Federal Register document revealed that the administration had launched an investigation into semiconductor imports on April 1.

Meanwhile, market participants are closely monitoring U.S. crude inventory data, due later this week, for signs of tightening supply. Last week’s report from the Energy Information Administration (EIA) showed an unexpected drawdown in stockpiles, which provided temporary support to prices. A repeat of this trend could reinforce bullish sentiment, especially as refiners ramp up activity ahead of the summer driving season.

Data released on Monday showed that China's crude oil imports in March increased by over 5% over the previous year, as arrivals of Iranian oil climbed in anticipation of stronger US sanctions enforcement.

Kazakhstan stated on Monday that its oil output declined 3% in the first two weeks of April compared to the March average, confirming a Reuters report, but it remains above its OPEC+ quota.

The Kazakh production dip, while modest, adds to a series of supply-side disruptions that have kept traders on edge. From unplanned outages in Nigeria to voluntary cuts by Saudi Arabia, the cumulative effect of these constraints has helped offset some of the pressure from rising U.S. shale output. However, with American production hovering near record highs, the sustainability of the current price rally remains uncertain.