By Colleen Howe
BEIJING (Reuters) – Oil prices continued to fall in on Tuesday after U.S. President Donald Trump paused military aid to Ukraine and as markets braced for U.S. tariffs on Canada, Mexico and China to take effect.
Brent futures fell 54 cents, or 0.75%, to $71.08 a barrel by 0149 GMT, while U.S. West Texas Intermediate (WTI) crude fell 36 cents, or 0.53%, to $68.01.
The pause to all U.S. military aid to Ukraine confirmed by a White House official on Monday followed Trump’s Oval Office clash with Ukrainian President Volodymyr Zelenskiy last week.
The market has viewed the growing distance between the White House and Ukraine as a sign of a potential easing of the conflict that could lead to sanctions relief for Russia and more oil supply returning to the market.
The pause followed a Reuters report that the White House has asked the State and Treasury departments to draft a list of sanctions that could be eased for U.S. officials to discuss with Russian representatives in the coming days as part of talks with Moscow, according to sources.
However, Goldman Sachs analysts have said that Russian oil flows are constrained more by Russia’s OPEC+ production target than sanctions and that an easing might not significantly increase flows.
A decision by OPEC+ to proceed with a planned oil output increase of 138,000 barrels per day, the first since 2022, is also weighing on prices. Oil prices fell about 2% to a 12-week low on Monday on the news and on worries that fresh U.S. tariffs will hurt global economic growth.
Trump’s 25% tariffs on imports from Canada and Mexico are set to take effect at 12:01 a.m. EST (0501 GMT) on Tuesday with 10% tariffs for Canadian energy, while imports on Chinese goods will increase to 20% from 10%. Analysts expect the tariffs to weigh on economic activity and fuel demand, putting downward pressure on oil prices.
“Market participants are struggling to gauge the impact of the flood of energy-related policy announcements made by the Trump administration this month. However, those weighing to the downside, notably U.S. tariff measures, are currently winning out,” BMI analysts wrote in a note.
(Reporting by Colleen Howe; Editing by Jamie Freed)
