Traders shouldn’t bet too much on rallying oil prices despite President Trump’s shortened deadline for Russia to reach peace with Ukraine or face sanctions, Barclays says.
“President Trump’s patience with Russia seems to be wearing thin, and oil markets have reacted somewhat to the prospect of a potential supply disruption,” the UK-based investment bank wrote in a note on Wednesday, as carried by Investing.com.
However, the upside is likely to be limited due to several considerations, including President Trump’s goal to keep oil and energy prices low, according to Barclays.
“We would caution against assigning too high of a probability to a sustained material disruption in Russian supplies at this time, given several considerations that could blunt the effect,” the bank’s analysts wrote.
These considerations are the Trump Administration’s priority to keep energy prices low, Russia’s ability to skirt sanctions since 2022, and potentially more difficult U.S. trade talks with China and India if Trump moves to impose secondary tariffs on buyers of Russian oil, Barclays notes.
Earlier this week, President Trump threatened “tariffs and stuff” if Russia doesn’t agree a ceasefire in 10 days, shortening the deadline he had previously given Putin to discuss peace or face sanctions.
Oil markets reacted on Tuesday to the much shorter deadline, with prices rallying to close 3% higher amid increased concerns that there could be some disruption to Russian oil supply.
Brent Crude prices settled above $72 per barrel on Tuesday—the highest level in more than a month.
“The potential impact of secondary tariffs on oil prices has us questioning whether Trump will actually follow through on such threats, at least at a 100% level. This would be a shock to the system,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note on Wednesday.
“A significantly lower tariff level, which gradually increases over time, would be more manageable for the market.”
By Charles Kennedy for Oilprice.com
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