Oil Heads for Gains as Market Braces for Trump
Oil is heading for a fourth straight weekly gain ahead of President-elect Donald Trump’s second term, with traders seeking clarity on sanctions and broad trade policies.
West Texas Intermediate is trading below $79 a barrel, up about 3% this week, while Brent has settled above $81. Trump’s advisers are crafting a broad sanctions strategy to try to facilitate a Russia-Ukraine diplomatic agreement while also putting pressure on Iran and Venezuela, according to people familiar with the matter. New trade tariffs could also disrupt global flows.
“I don’t think they’re going to rush into sanctions” when Trump takes office, Ed Morse, senior adviser at Hartree Partners LP, said on Bloomberg Television. There may be a slew of new executive orders, but “tariffs and sanctions will be on the back burner, and there will be a little bit of wait and see,” he said. A week ago, the Biden administration unveiled its toughest-ever curbs on Russian oil. The fallout from that move is still reverberating in global crude markets, with shipping costs skyrocketing and longtime buyers of Russian oil including China and India looking elsewhere for supplies. Crude has rallied strongly since the year began, as cold weather in the Northern Hemisphere winter boosted heating demand, U.S. crude stockpiles fell to seasonal lows and sanctions threatened to curb supplies. Trump, who will be inaugurated on Monday, has vowed to impose tariffs on Canada, including on its oil.
While Canada has resisted, the leader of its largest oil-producing province has resisted the effort. The physical market has also strengthened. The gap between Brent’s two nearest contracts, known as the prompt spread, has widened in a sign of tighter conditions. The gap last stood at $1.38 a barrel in backwardation, compared with just 39 cents a month earlier. In the Middle East, grades including Murban and Oman have surged relative to their benchmarks.
Source: Bloomberg
