Oil markets started the new week on the downside, falling for the second straight day after President Trump was sworn in for a second term on Monday. Brent crude for March delivery was down 0.85% to trade at $79.49 a barrel at 11:40 a.m. ET, while WTI crude for February delivery was down 1.5% at $76.68 the barrel. According to Tamas Varga, oil analyst at PVM, the drop in prices can be attributed to the enormous uncertainty surrounding the new president’s new policies.
“Given the market’s performance so far this year, it’s reasonable to see some people taking profits before the Trump administration’s modus operandi becomes clearer.” Varga told Reuters.
Last month, an investigation by law firm Haynes Boone LLC found that banks were bracing for oil prices. to fall below $60 a barrel in the middle of President-elect Donald Trump’s new term. Trump says he will push shale producers to increase production.
However, commodities experts at Standard Chartered predict that the strength in oil markets seen at the start of the new year is likely to persist, fueled, among other things, by the withdrawal of more Russian barrels from the market following the sanctions. According to StanChart, the new restrictions roughly triple the number of Russian oil tankers directly sanctioned, enough to affect about 900,000 barrels per day (bpd). While it is very likely that Russia will attempt to circumvent sanctions by employing even more shadow fleet tankers and conducting ship-to-ship transfers, StanChart predicts shifts of 500,000 b/d over the next six month.
Besides sanctions, StanChart says there are other reasons for strong fast markets: OPEC+ has largely met its target quotas; demand unrelated to weather conditions is more robust than consensus expected; and non-OPEC supply growth is weaker than expected. In short, StanChart says market strength will likely persist after weather conditions return to seasonal averages. Last month, commodity analysts at Standard Chartered argued that OPEC+’s latest move to delay the planned increase in production by three months until April 2025 and the one-year extension of the full implementation of production cuts until the end of 2026 will ensure that oil markets will not be in surplus in 2025 .
By Alex Kimani for Oilprice.com
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