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Oil prices rise as tariff concerns and Russian supply threats compete for attention

The oil prices were not much different on Friday, after having fallen more than 1% the previous session. Traders were digesting the impact of increased U.S. Tariffs which may slow down economic growth and reduce global fuel demand.

Brent crude futures fell 7 cents or 0.1% to $71.63 per barrel at 0656 GMT. U.S. West Texas Intermediate Crude was down 10 Cents, or 0.14 %, to $69.16 per barrel.

Brent prices will still rise by 4.9% this week, while WTI will climb by 6.4%. This is after U.S. president Donald Trump threatened earlier in the week to impose tariffs on Russian crude buyers, including China and India, as a way to put pressure on Russia to end its war with Ukraine.

Suvro Sarkar is the energy sector team leader at DBS Bank. He said that the recent bullishness of oil prices was largely due to the completion of trade agreements, with a few notable exceptions. Further progress in trade negotiations with China could boost the confidence of oil traders in the future.

Investors were focused more on Trump's new tariffs, which are largely higher, that will be imposed on U.S. trade partners from August 1.

Trump signed an Executive Order on Thursday that imposed tariffs of 10% to 41% for U.S. imports coming from dozens countries and territories, including Canada and India.

Analysts have warned that the new levies could limit economic growth because they will increase prices and affect oil consumption.

There were signs on Thursday that the existing tariffs in the U.S. are already driving up prices. The U.S. is the largest economy and the biggest oil consumer.

Inflation in the United States increased in June, as tariffs increased prices of imported goods like household furniture and recreational products. The data supports the view that the price pressures will increase in the second half and the Federal Reserve may delay interest rate cuts to at least October.

The oil price could be affected by maintaining interest rates, as high borrowing costs can hinder economic growth.

Trump's threat to impose secondary tariffs of 100% on Russian crude buyers has supported the price because there was concern that this would disrupt oil trade and remove some oil off the market.

DBS' Sarkar stated that India's slowing down of Russian imports could lead to a curtailment in supply, but this would be largely negated by Chevron's resumption of oil production Venezuela, record U.S. output, and growing U.S. supplies.

JP Morgan analysts wrote in a note published on Thursday that Trump’s warnings of sanctions against China and India for their continued purchases of Russian crude oil could put 2,75 million barrels of Russian seaborne exports of oil at risk. Both countries are among the top three crude oil consumers in the world.

Analysts said that the Trump administration will find it impossible to sanction the second largest oil exporter in the world without driving up oil prices. They were referring to Russia. Reporting by Georgina Mccartney in Houston. Christian Schmollinger, Mark Potter and Christian Schmollinger edited the article.

(source: Reuters)