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Oil prices started the week slightly lower, as markets balanced optimism over tighter supplies against cautious anticipation of U.S. President-elect Donald Trump’s policy announcements.
Price Movements
- Brent crude futures for March delivery fell 0.2% to $80.61 a barrel.
- WTI crude futures dipped 0.1% to $77.31 a barrel.
This decline follows four consecutive weeks of strong gains, with volumes subdued by the U.S. holiday.
Market Focus: Trump’s Inauguration
Investors are watching for President-elect Donald Trump’s inauguration later on Monday. His second-term agenda includes:
- Increasing trade tariffs, particularly on China—the world’s largest oil importer.
- Boosting U.S. energy production by lifting regulations on domestic oil and gas sectors.
- U.S. production is already near record highs of 13 million barrels per day and could offset the supply impact of recent U.S. sanctions on Russia.
Supply and Demand Outlook
- Supply:
- Recent U.S. sanctions against Russia aim to tighten global oil supply.
- Eased Middle East tensions, following a prisoner exchange between Hamas and Israel, have reduced geopolitical risk premiums.
- Demand:
- U.S. oil demand has been mixed. While cold weather boosted heating fuel demand, travel disruptions during the holidays curbed consumption.
- China’s demand remains a concern, with economic weakness weighing on its crude imports.
China’s Economic Response
- The People’s Bank of China left its loan prime rate unchanged on Monday, signaling caution amid trade tensions.
- Despite challenges, China’s economy showed signs of recovery in late 2024 following aggressive stimulus measures, which could support future oil demand.
Key Takeaway
Oil traders are navigating an uncertain environment shaped by geopolitical developments, U.S. energy policies, and China’s economic trajectory. While tighter supplies from sanctions could lift prices, the potential for weaker global demand—particularly from China—might limit significant gains. Markets will closely monitor Trump’s energy and trade policies for further clarity.
