(Bloomberg) — Oil pared losses on speculation that US President Donald Trump will impose tighter sanctions on Iran, which could threaten the country’s crude exports.
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West Texas Intermediate was little changed near $73 a barrel after earlier tumbling as much as 3.4%. Ahead of Trump’s meeting with Israeli Prime Minister Benjamin Netanyahu, market participants are speculating that Trump may return to a maximum pressure campaign against Iran, an idea that was echoed by his pick for national security adviser ahead of his inauguration.
Over the past four years, sanctions evasion and more relaxed US enforcement have allowed Iran nation to boost oil exports by about 1 million barrels a day. Enforcing sanctions may slash the country’s exports by about two-thirds and could cost Iran roughly $30 billion a year.
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Oil is trading little changed for the year on the prospect of a trade war between the US and China that would sap global growth and menace energy demand. China earlier announced retaliatory measures against Trump’s tariffs, temporarily sending futures below where they ended 2024 for the first time this year.
China will place levies on a range of US goods, including crude oil and liquefied natural gas, in response to Washington’s “unilateral imposition of tariffs,” the country’s finance ministry said.
The US shipped about 250,000 barrels of crude a day to China on average last year, a relatively small volume. But an escalation of trade disputes between the world’s two largest economies could have a broader impact and hurt global consumption.
The trade confrontation with China stands in contrast to Trump’s agreement to push back planned levies on Canada and Mexico by a month after the nations agreed to take tougher measures to combat migration and drug trafficking. The flare-up came as China’s markets were shut for the Lunar New Year holidays.
Oil futures have faced a bumpy few weeks, first rising on a cold winter and US sanctions on Russian energy flows, before paring those gains after Trump took office and threatened blanket tariffs that could hamper global growth. Demand concerns remain pertinent, with top crude importer China’s manufacturing activity unexpectedly declining for a second month in January.