Nymex Petroleum Futures: Tariff Threats Drive Volatility, Prices Retreat

Petroleum futures on the Nymex experienced a volatile trading day on Tuesday, as crude oil and refined product prices initially surged on news of potential tariffs on Canada and Mexico, only to retreat later in the session. The strong U.S. dollar and increased crude oil inventories also played a role in the market dynamics.



The day started with a rally in petroleum futures, driven by President Trump's threat to impose tariffs on Canada and Mexico. This news created uncertainty in the market, leading to increased volatility and speculative trading. Crude oil prices surged, with February West Texas Intermediate crude climbing 96cts to $70.20/bbl, while March WTI was up 93cts to $69.74/bbl. Brent crude futures also gained, with February contracts rising 94cts to $73.57/bbl, and March contracts up 90cts to $73.22/bbl.

However, the rally was short-lived, as the strong U.S. dollar and increased crude oil inventories put downward pressure on prices. The U.S. Dollar Index rose 0.27%, making dollar-denominated energy contracts more expensive for foreign buyers and reducing demand. Additionally, the Energy Information Administration's (EIA) weekly report showed a solid increase in crude oil inventories, which further weighed on prices.



Refined product prices also retreated, with February RBOB futures down about 1ct to $2.0258/gal, and February ULSD futures up about 1ct to $2.369/gal. Prices in several U.S. spot markets were off by more than a cent heading into the afternoon, as the cold weather that had been supporting demand began to ease.

The threat of tariffs on Canada and Mexico continues to hang over the market, creating uncertainty and potential for further volatility. However, the strong U.S. dollar and increased crude oil inventories may continue to put downward pressure on prices in the near term. Market participants will be closely watching the situation, as well as the upcoming OPEC+ meeting, to gauge the impact on petroleum futures.

In conclusion, the Nymex petroleum futures market experienced a volatile trading day on Tuesday, driven by geopolitical events, currency fluctuations, and inventory changes. While the threat of tariffs initially boosted prices, the strong U.S. dollar and increased crude oil inventories ultimately led to a retreat in prices. Market participants will continue to monitor the situation, as well as other key factors, to make informed decisions about buying and selling petroleum futures.