Economic Update – Baghdad
Oil prices experienced a decline on Tuesday, following the announcement from U.S. President Donald Trump regarding the cessation of military aid to Ukraine. This development comes as markets brace for the implementation of tariffs on imports from Canada, Mexico, and China.
As of 01:49 GMT, Brent crude futures decreased by 54 cents, or 0.75%, settling at $71.08 per barrel. Concurrently, U.S. West Texas Intermediate crude fell by 36 cents, or 0.53%, to $68.01.
A White House spokesperson confirmed the halt of all U.S. military assistance to Ukraine, a decision that arose from a recent confrontation between President Trump and Ukrainian President Volodymyr Zelensky during a meeting last week.
The market interprets this growing divide between the U.S. and Ukraine as a potential indicator for a de-escalation of the conflict, which could lead to a reduction of sanctions on Russia and thereby increase oil supplies returning to the global market.
Analysts at Goldman Sachs noted that Russian oil supplies are currently constrained more by OPEC+ production decisions than by sanctions, suggesting that easing these sanctions may not significantly boost oil flows.
The OPEC+ coalition is proceeding with its planned production hike of 138,000 barrels per day, marking the first increase since 2022.
On Monday, oil prices dropped approximately 2%, reaching their lowest levels in 12 weeks amid concerns that impending U.S. tariffs might negatively impact global economic growth.
Trump’s tariffs, set to take effect at 12:01 AM EST (05:01 GMT) on Tuesday, will impose a 10% duty on Canadian energy imports, while tariffs on Chinese goods will increase from 10% to 20%. Analysts predict that these tariffs will exert downward pressure on economic activity and demand, further influencing oil prices.
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