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Oil markets are waiting to see if Trump’s Russian oil tariff threats is a bluff

The oil markets shrugged Monday off the threat of U.S. president Donald Trump to impose tariffs on Russian oil buyers as the shock factor of the White House's barrage of threats begins to wear out with jaded traders.

Analysts and traders have questioned the seriousness of Trump's proposal.

Warren Patterson, ING's director of commodities strategy, said that the U.S. government's announcements on tariffs and other sanctions have a tired feel.

He said that the market would not overreact until he could provide more concrete information.

The price of oil fell on Monday. Brent crude futures, the most active, were down 0.3% to $72.55 per barrel at 0710 GMT. U.S. West Texas intermediate crude was also down by 0.4% to $69.09 per barrel.

China and India are two of the largest buyers of Russian crude oil. Their consent would be essential to any secondary sanctions package that could seriously harm the exports of the world's number two oil exporter.

India became the largest buyer of Russian crude oil after the Russian invasion of Ukraine. This accounted for 35% of India’s total crude imports by 2024.

India's oil minister said in February that the country's refiners will buy Russian oil from companies and ships that are not sanctioned. This effectively reduces the number of vessels and cargoes available.

Reports indicate that Chinese state-owned oil companies are avoiding Russian oil. Sinopec, Zhenhua Oil and two others have stopped purchasing it, while the other two have reduced their volumes due to renewed U.S. sanction.

On Monday morning, however, several Chinese traders stated that they were not fazed at all by the new threat. All three people who spoke to said that Trump's propensity for brinksmanship made them discount what he said.

One trader said, "No price response yet but the market is still bullish due to all the uncertainty in supply." It's difficult to predict the impact as Trump always bluffs.

In response to a query about tariffs, the Ministry of Foreign Affairs of China said that its cooperation with Russia was neither directed by nor affected in any way by third parties.

Analysts said that if the tariffs were to become a serious threat to the markets, they would focus on how strict the policy was to be implemented and if the Organization of Petroleum Exporting Countries (OPEC) would increase production to compensate for any decrease in Russian exports.

Patterson said that the secondary sanctions on Venezuelan oil imposed last week can be used as a template for assessing the impact of similar policies against Russia.

Chinese buyers had already stopped purchases before the sanctions took effect on Wednesday. Analysts and traders expect that some sales will resume, as buyers come up with workarounds until Beijing issues a blanket prohibition.

(source: Reuters)