Falling oil prices will slow US inflation and give Donald Trump additional leverage over Saudi Arabia and Russia. US tariffs have already hit the Brent price. Let’s discuss this topic and make a trade plan.
The article covers the following subjects:
Major Takeaways
- New US tariffs will reduce oil demand.
- The White House has exempted crude imports from duties.
- Lower Brent prices are beneficial to Donald Trump.
- Short trades on Brent can be opened if the quotes return above $73.3.
Weekly Fundamental Forecast for Brent
US President Donald Trump has taken decisive action to protect domestic interests. He did impose universal tariffs of 10%, and some 60 countries received even higher duties on imports. In addition, China, the EU, and other countries have promised to retaliate, a move that threatens to slow the global economy. Against this backdrop, global oil demand will be curtailed, and prices will decline. Notably, the Brent crude oil price experienced significant fluctuations on America’s “Liberation Day,” marking its worst two-day performance since February.
Donald Trump has repeatedly emphasized the primary objectives of his tariffs: addressing budget shortfalls through levies and returning factories and manufacturing to the US. However, a key objective that the US president has not publicly addressed is the impact on the global economy. A global trade war will lead to a slowdown in the world economy and demand for oil, dragging Brent prices down and reducing prices for gasoline and other petroleum products. As a result, US inflation will slow.
The US president’s strategic focus on the oil industry is underscored by the exemption from tariffs on its imports into the US. A similar approach was previously adopted by the White House, as evidenced by exemptions granted to suppliers of oil from neighboring countries. The US demand for oil is estimated at 18.4 million bpd, of which 6.6 million bpd was purchased abroad in 2024. This includes 4 million barrels from Canada and 464 thousand from Mexico.
US Oil Imports
Source: Reuters.
The strategy may include a deliberate cooling of the US economy through tariffs, which could result in short-term challenges for Americans before making America great again. Notably, high prices are not compatible with a weak economy. Therefore, a surge in prices is expected to be short-lived.
The resumption of a downward trend in Brent prices could offer a strategic advantage for the US. The bearish market conditions are putting pressure on oil-producing countries like Saudi Arabia and Russia, giving Donald Trump additional leverage in negotiations.
Retaliatory tariffs by China and the European Union could further exacerbate the situation. The more widespread the trade war, the lower the oil demand, and the more Brent falls. Meanwhile, the US wants to see oil at $50 per barrel.
US Crude Exports
Source: Reuters.
Indeed, US producers may reduce their output, disregarding President Trump’s “drill, baby, drill” campaign. At the same time, Canada might begin supplying oil to the US at a significant discount as the country will have to compensate for the removal of US tariffs.
Weekly Trading Plan for Brent
Brent will likely return to the downtrend. Short positions formed on a return below $73.5 can be kept open. In addition, one can sell oil at the market price as long as it trades below $73.3.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of UKBRENT in real time mode
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